CORPORATESISSUER COMMENT 4 April 2016RATINGSPETROLEOS MEXICANOS (PEMEX) Moodys SR Unsecured Rating Baa3Moodys Outlook NEGBond-Implied Rating Ba2CDS-Implied Rating B2EDF-Implied Rating NAAs of April 1, 2016ContactsAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Petroleos MexicanosPEMEXs Market-Implied Ratings Drop Both of Petroleos Mexicanoss market-implied ratings are two notches below their levels of six months ago and at their lowest levels of the last five years (Figures 1 and 2).In the first week of October 2015 the bond-implied rating for PEMEX was Baa3. It since worsened to Ba2. At that same time the companys CDS-implied rating was Ba3. This fell to B3 in January 2016. Since then it has recovered by one notch to B2.FIGURE 1. PEMEX: MOODYS AND MARKET-IMPLIED RATINGS SINCE OCTOBER 1, 2015 (DAILY DATA)We do not publish an EDF'-implied rating for PEMEX.The weakening in global energy prices weighed heavily on the market signals of energy companies such as PEMEX since the fall of last year. In addition PEMEX has experienced deteriorating financial metrics and has been funding capital expenditures from external sources. These pressures resulted in two ratings downgrades for PEMEX (by three notches in total from A3 to Baa3) by Moodys since November 24 (please see ratings and credit discussions below).Readers will recall that when a market-implied rating falls the underlying securities have underperformed the broad market.1MOODY'S ANALYTICS CORPORATES2 4 April 2016 Petroleos Mexicanos: PEMEXs Market-Implied Ratings DropFIGURE 2. PEMEX: MOODYS AND MARKET-IMPLIED RATINGS, LAST FIVE YEARS (WEEKLY DATA)MOODY'S ANALYTICS CORPORATES3 4 April 2016 Petroleos Mexicanos: PEMEXs Market-Implied Ratings DropAccording to our ratings gap-c...
