The 4T uses the Luxembourg Stock Exchange to indebt Mexico in favor of Pemex
MEXICO CITY (Proceso).– The Ministry of Finance and Public Credit (SHCP) launched a financial operation that, although technically not considered a direct state guarantee, leaves the federal government in a position of automatic support in the event of noncompliance by Petróleos Mexicanos (Pemex) .
This involves the placement of Pre-Capitalized Notes (known as P-Caps), an instrument that triangulates financing for the oil company through a vehicle in Luxembourg, but whose ultimate risk falls on the Mexican State.
According to documents to which Proceso had access, the instrument is structured under New York law and was designed by JP Morgan as sole advisor, with Citi and BofA Securities as joint bookrunners.
The model operates through a vehicle called Eagle Funding LuxCo S.à rl (EFL I), which issues P-Caps to institutional investors. The funds raised are invested in U.S. Treasury bonds (USTs and STRIPS), which are lent to Pemex under a securities lending scheme.
In this model, Pemex receives eligible assets and assumes the obligation to return them, along with the associated returns.
However, if it fails to do so in a timely manner, or if it fails to pay the established facility fee, the mechanism includes an automatic clause: Mexico will issue and sell sovereign bonds ("Mexico Notes") to the financial vehicle, replacing Pemex.
The same situation is triggered if an insolvency event occurs, a moratorium on public external debt, or a broader default by the sovereign.
Although the Ministry of Finance insists that "this transaction does not constitute a guarantee for Petróleos Mexicanos (Pemex)," in fact, the Mexican state assumes the ultimate risk: if the company doesn't pay, the nation will. Ultimately, the debt falls on the country—that is, on the taxpayers.
Edgar Amador's Ministry of Finance (SHCP) justified the transaction, without disclosing the amount, as part of a "comprehensive strategy to strengthen Pemex's financial position," with objectives such as improving its liquidity, optimizing its maturity profile, and reducing its financial costs.
The operation "is being carried out in accordance with the Federal Public Debt Law, the Federal Revenue Law, and within the debt ceilings authorized by Congress for fiscal year 2025."
However, the documents obtained by this media outlet detail that the Luxembourg-based entity may liquidate its assets early and distribute the "Mexico Notes" directly to P-Cap holders in the event of Pemex's default.
The automatic issuance mechanism transforms this instrument into a form of contingent debt that, although disguised as a structured investment, becomes a sovereign liability in the event of any significant credit event.
Amortization is planned in tranches: 14% in 2027, 43.5% in 2028, 14% in 2029, and the remainder (28.5%) in 2030.
The coupon will be paid semiannually on February 17th and August 17th. The minimum placement amount is $250,000, and the bond is listed on the Luxembourg Stock Exchange.
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