[Federal Register Volume 69, Number 179 (Thursday, September 16, 2004)]
[Notices]
[Pages 55848-55850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2205]
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SECURITIES AND EXCHANGE COMMISSION
[File No. 22-28755]
Application and Opportunity for Hearing: Petroleos Mexicanos and
the Pemex; Project Funding Master Trust
September 10, 2004.
The Securities and Exchange Commission gives notice that Petroleos
Mexicanos (Pemex) and the Pemex Project Funding Master Trust have filed
an application under Section 304(d) of the Trust Indenture Act of 1939.
Pemex and the Master Trust ask the Commission to exempt from the
provisions of Section 316(b) of the 1939 Act: (1) An indenture between
Pemex, certain subsidiary guarantors of Pemex and Deutsche Bank Trust
Company Americas, as trustee and (2) an indenture between the Master
Trust, Pemex as guarantor, certain subsidiary guarantors of Pemex and
Deutsche Bank Trust Company Americas, as trustee. The indentures relate
to debt securities of Pemex and the Master Trust that will be issued in
the future and that will be qualified under the 1939 Act.
Section 304(d) of the 1939 Act, in part, authorizes the Commission
to exempt conditionally or unconditionally any indenture from one or
more provisions of the 1939 Act. The Commission may provide an
exemption under Section 304(d) if it finds that the exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the 1939
Act.
Section 316(b) provides, with stated exceptions, that, the right of
any holder of any indenture security to receive payment of the
principal of and interest on such indenture security, on or after the
respective due dates expressed in such indenture security, or to
institute suit for the enforcement of any such payment on or after such
respective due dates, shall not be impaired or affected without the
consent of such holder * * *
The application requests an exemption from Section 316(b) to allow
the inclusion of a ``collective action clause'' in each of the
indentures at issue. These collective action clauses would permit,
under specified circumstances described in the application, an
amendment of payment terms (including the amount due as principal or
interest and the maturity date) with the consent of the holders of a
supermajority (75%) of the outstanding principal amount of debt
securities. Absent an exemption, the 1939 Act would preclude the
inclusion of collective clauses in indentures qualified under the 1939
Act.
In their application, Pemex and the Master Trust allege that:
1. Pemex is a decentralized entity of the federal government of
Mexico. It is wholly owned and controlled by the Mexican federal
government and thus has no private shareholders. Because Mexico does
not guarantee Pemex's debt, Pemex is not considered a foreign
government or political subdivision of the Mexican government for the
purposes of Schedule B of the Securities Act of 1933, and instead
follows the rules and regulations applicable to foreign private
issuers. Furthermore, in connection with offerings registered under the
1933 Act, Pemex and the Master Trust qualify their indentures under the
1939 Act based on the understanding that a government guaranty would be
necessary for Pemex and the Master Trust to fall within the exemption
provided by Section 304(a)(6) of the 1939 Act.
2. Under a subsidiary guarantee agreement, Pemex's three principal
operating subsidiaries, each of which is also a decentralized public
entity of the federal government of Mexico, jointly and severally
guarantee payment of principal and interest on Pemex's debt.
3. The Master Trust is a Delaware statutory trust established by
Pemex as a financing vehicle to segregate the funding of its long-term
productive infrastructure projects and take advantage of preferential
budgetary treatment. Pemex is the only beneficiary of the Master Trust
and controls the Master Trust in all of its activities. Pemex
guarantees all of the Master Trust's debt, and the subsidiary
[[Page 55849]]
guarantors, in turn, jointly and severally guarantee Pemex's payment
obligations as guarantors. The Master Trust has no shareholders, issues
no subordinated debt and is consolidated into Pemex's consolidated
financial statements prepared in accordance with Mexican generally
accepted accounting principles.
4. As noted above, in connection with previous offerings registered
under the 1933 Act, including exchange offers, Pemex and the Master
Trust have qualified their indentures under the 1939 Act. Pemex and the
Master Trust will qualify the indentures at issue under the 1939 Act.
5. Mexican government debt restructurings have proceeded in tandem
with Pemex's debt restructuring primarily because Pemex's debt makes up
a substantial part of Mexican public sector debt and, accordingly,
investors view the debt of Pemex (and the Master Trust) and the debt of
Mexico as inextricably connected. Any future debt restructuring of
Mexico's public debt would thus be expected to include the debt of
Pemex and the Master Trust.
6. Mexico, as a sovereign issuer to which the 1939 Act does not
apply pursuant to Section 304(a)(6) of the 1939 Act, recently
introduced collective action clauses in its debt securities. The
collective action clauses permit amendment of the payment terms and
certain key nonfinancial terms with the consent of the holders of 75%
of the outstanding principal amount of the debt securities. Because
Mexican government debt restructurings have historically been
negotiated and implemented in tandem with restructuring of the debt of
Pemex, Pemex and the Master Trust request that they be permitted to
issue debt securities in the future under indentures that contain
collective action clauses similar to those that the Mexican government
has recently introduced.
7. The collective action clauses are contained in sections 9.02 of
the indentures that have been submitted as Exhibit A and Exhibit B to
the application. These provisions are designed to ensure that the
collective action clauses are narrowly tailored to be invoked only in
situations in which an effective restructuring of Pemex's and the
Master Trust's debt is necessary in order to effect a tandem general
restructuring of the Mexican government's debt. Specifically, the
proposed collective action clauses would permit amendments to payment
terms with the consent of the holders of 75% of the principal amount of
the series of debt securities affected thereby in the event that such
an amendment is being made in connection with a ``General
Restructuring'' by Mexico. ``General Restructuring'' is defined as a
request by Mexico for an amendment or an exchange offer by Mexico, each
of which affects a matter that would (if made to Pemex's or the Master
Trust's debt securities) constitute a ``Reserved Matter,'' and that
applies to either (1) at least 75% of the aggregate principal amount of
outstanding Mexico External Market Debt that will become due and
payable within a period of five years following such request or
exchange offer or (2) at least 50% of the aggregate principal amount of
Mexico External Market Debt outstanding at the time of such request or
exchange offer. Mexico External Market Debt is defined as all debt
securities issued by the Mexican government and indebtedness of the
Mexican government for borrowed money which is payable or at the option
of its holder may be paid in a currency other than Mexican pesos,
excluding any such indebtedness that is owed to or guaranteed by
multilateral creditors, export credit agencies and other international
or governmental institutions. The principal amount of Mexico External
Debt that is the subject of any request by Mexico for such an amendment
will be added to the principal amount of Mexico External Market Debt
that is the subject of a substantially contemporaneous exchange offer
by Mexico for the purposes of determining the existence of a general
restructuring.
8. As decentralized entities of the federal government, like the
Mexican government itself, Pemex and its subsidiary guarantors are not
subject to commercial bankruptcy protection under Mexican law or
Chapter 11 of the U.S. Bankruptcy Code. Although the Master Trust is
eligible for bankruptcy protection under Chapter 11 of the U.S.
Bankruptcy Code, in the event of such a filing or reorganization
thereunder, the Master Trust's creditors could still continue to
enforce their rights against Pemex under its guaranty of the Master
Trust's debt securities notwithstanding any such filing or proceeding.
Because a bankruptcy filing by the Master Trust would not affect
Pemex's and the subsidiary guarantors' obligations as guarantors, Pemex
and the Master Trust are thus not able to avail themselves of the
benefits of consensual debt restructuring that are afforded other
companies under Mexican and U.S. bankruptcy law.
9. Because Pemex, like the Mexican government, has no recourse to
formal bankruptcy or reorganization proceedings under Mexican or U.S.
law, with respect to its own debt securities or its guaranty of the
debt securities issued by the Master Trust, and given the practical
impossibility of obtaining consents from the holders of 100% of the
debt that will be issued, the collective clauses are necessary for an
effective restructuring of the external bonds of Pemex and the Master
Trust.
10. The proposed collective action clauses would place an investor
in debt securities issued or guaranteed by Pemex in no materially worse
position than it would be in were Pemex able to avail itself of Mexican
or U.S. bankruptcy proceedings.
11. In addition to the collective action clauses, Pemex and the
Master Trust propose to increase the percentage of holders needed to
consent to modifications of certain key nonpayment terms, expand the
scope of persons who are excluded from voting and quorum purposes and
add a restriction on their ability to issue further debt securities
that are fungible with the debt securities originally issued at a
discount. These measures are intended to provide a further safeguard
against the potential abuses that the 1939 Act intended to rectify and
protect investors from other coercive measures.
Any interested persons should look to the application for a more
detailed statement of the asserted matters of fact and law. The
application is on file in the Commission's Public Reference Section,
File Number 22-28755, 450 Fifth Street, NW., Washington, DC 20549.
The Commission also gives notice that any interested persons may
request, in writing, that a hearing be held on this matter. Interested
persons must submit those requests to the Commission no later than
October 12, 2004. Interested persons must include the following in
their request for a hearing on this matter:
--The nature of that person's interest;
--The reasons for the request; and
--The issues of law or fact raised by the application that the
interested person desires to refute or request a hearing on.
The interested person should address this request for a hearing to:
Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450
Fifth Street, NW., Washington, DC 20549-0609. At any time after October
12, 2004, the Commission may issue an order granting the application,
unless the Commission orders a hearing.
[[Page 55850]]
For the Commission, by the Division of Corporation Finance,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2205 Filed 9-15-04; 8:45 am]
BILLING CODE 8010-01-P