Deficit of Hope

I remember it well. The spring of 1982 was an important time in my life. Our team at Citibank had just completed a $2 billion syndicated loan for Petroleos Mexicanos (Pemex) issued at 3 3/4% over the London Interbank Offer Rate (LIBOR). The syndicated loan was fully sold out to 154 banks around the world and Walter Wriston, the famous chairman of Citibank, attended the luncheon celebrating the issue. That success was followed up by a quick bond issue, also for Pemex, with a coupon of 17 ¾%. What??? You might say. How can anyone borrow money at such a rate? Its mindboggling.