PEMEX DRILLS MARKET WITH $1.45 BILLION DEAL


In the midst of speculation and contradictory reports, Petroleos Mexicanos (Pemex) last week sold the latest chunk of its oil receivables-backed $5 billion securitization program.

The gossip began even before the deal hit the market, with market watchers suggesting that the company had been looking to launch the deal as early as April but decided to postpone. And earlier this month, against the background of turmoil in Argentina, investors were saying that lead manager Morgan Stanley Dean Witter was having trouble placing the paper, with some investors talking about "Pemex overdose."

"They are periodically accessing the market," explained a source familiar with the transaction. "Investors can't afford to participate in all of their deals. There is a feeling that there is too much Pemex paper out there."

In the end, it seems that not all investors were suffering from Pemex fatigue after all. In an oversubscribed deal, the company placed $1.45 billion worth of bonds, mainly with U.S. investors.

The notes, which were rated Baa1 by Moody's, triple-B by Standard & Poor's, single-A by Fitch IBCA and single-A minus by Duff & Phelps, were sold at an average of 357 bps over Treasuries to yield an average of 9.35 percent a year. The offering was split into four tranches with final maturities of four, eight, 11 and 16 years. The eight-year tranche was wrapped by MBIA-Ambac and received a triple-A credit rating.

"There were a variety of erroneous, even misleading comments circulating in the market," said a source. "In the end the appetite was there and the deal did very well."

This is Pemex's third issuance under Pemex Finance Ltd.'s $5 billion program.

In December 1998, the company sold paper worth $1 billion, followed by a $1.5 transaction in February this year. TH