Rating On Poinsettia Finance Ltd. Lowered Following Sovereign Rating Action

  • We lowered our rating on Poinsettia Finance Ltd.'s senior secured notes to 'BBB' from 'BBB+'.
  • The rating action follows the March 26, 2020, downgrade of our foreign credit rating on Mexico, which resulted in the downgrade on PEMEX, the notes' guarantor.
MEXICO CITY (S&P Global Ratings) March 27, 2020--S&P Global Ratings today lowered its rating on Poinsettia Finance Ltd.'s senior secured notes to 'BBB' from 'BBB+'. The notes, due in 2031, are a repack securitization backed by a sale-leaseback transaction with an unconditional guarantee from Petróleos Mexicanos SA (PEMEX).
Today's rating action follows the March 26, 2020, downgrade of the foreign credit rating on Mexico, which resulted in a similar rating action on PEMEX, the unconditional and irrevocable guarantor of the underlying obligations under the lease agreement.
As PEMEX provided a full and irrevocable guarantee on the monthly rent payments that back the transaction, the rating on the notes are weak-linked to the rating on the guarantor (PEMEX). Additionally, the transaction's structure relies on hedging agreements; therefore, it is also exposed to the credit risk of the swap counterparties. As of today, the ratings of these counterparties remain in line with the rating on the notes.
The downgrade of PEMEX and its subsidiaries--P.M.I. Trading Ltd., PMI Norteamerica S.A. de C.V., and Mex Gas Supply S.L.--follows a similar action on the sovereign (see "Mexico Foreign Currency Rating Lowered To 'BBB' And Local Currency To 'BBB+' On Hit To Trend Growth; Outlook Negative," published March 26, 2020), reflecting our expectation of an almost certain likelihood of extraordinary government support to the company in a scenario of financial distress. We continue to base our view on our assessment of PEMEX's critical role for the Mexican government, both economically and for the execution of the government's energy policy. Our assessment also captures the integral link between PEMEX and the government, given its full ownership of the company and the high government involvement in all strategic decisions.
We will continue to review whether, in our view, the rating assigned to the notes remains consistent with the transaction's underlying credit quality, and we will take rating actions as we deem necessary.
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