Conformed Copy - L2916 - Steel Sector Restructuring Project - Amendment 1

Page 1 February 4, 1990 Dr. Pedro Aspe Armella Minister of Finance Secretaria de Hacienda y Credito Publico Palacio Nacional, Primer Patio, Mariano, 4o Piso 06066 Mexico, D.F. Mexico. Mr. Juan Jose Paramo Director General Nacional Financiera, S.N.C. Plaza NAFINSA Insurgentes Sur 1971 Torre Sur, 9o. Piso CP 01020 Mexico, D.F. Mexico. Dear Sirs: Re: Loan No. 2916-ME (Steel Sector Restructuring Project) - Amendment Please refer to the Loan Agreement dated March 15, 1988 for the above-referred Loan (the "Loan Agreement") between International Bank for Reconstruction and Development (the Bank) and Nacional Financiera, S.N.C. (the Borrower), and to the Guarantee Agreement of even date therewith between the United Mexican States (the Guarantor) and the Bank ("the Guarantee Agreement"). In response to your request and the discussions between our respective representatives, we are pleased to inform you that the Bank hereby agrees to amend the Loan Agreement and the Guarantee agreement for the purpose of setting aside a portion of the proceeds of the Loan provided for in the Loan Agreement for the implementation of a debt reduction plan of the Guarantor. Accordingly, the Bank hereby proposes to amend the Loan Agreement and the Guarantee Agreement as follows: I. Loan Agreement A. Preamble (i) A new paragraph (B) is added after paragraph (A) to read as follows: "(B) it is contemplated that the Guarantor may require assistance from the Bank in the implementation of a Debt Reduction Plan (as hereinafter defined);". (ii) Former paragraphs (B) and (C) are relettered as "(C)" and "(D)" respectively. B. Section 1.02 (i) A new paragraph (aa) is added after paragraph (z) to read as follows: "(aa) "Debt Reduction Plan" means a plan of the Guarantor submitted to the Bank for partial funding under this Agreement to reduce the Guarantor's principal payments on its external loans from non-official creditors;" Page 2 (ii) Former paragraphs (aa) and (bb) are relettered as "(bb)" and "(cc)" respectively. C. Article III (i) A new Section 3.05 is added after Section 3.04 to read as follows: "Section 3.05. Subject to agreement by the Borrower, the Guarantor and the Bank on the terms and conditions to be applied in such case, the Borrower may use a portion of the proceeds of the Loan as provided in Schedule 1 to this Agreement for the implementation of a Debt Reduction Plan under Part C of the Project described in Schedule 2 to this Agreement." D. Schedule 1 (i) Category 1 of the table in paragraph 1 is amended to read as follows: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed "(1) Imported goods 50,000,000 100% of foreign under Part A expenditures" of the Project (ii) A new category (5) is added to the table in paragraph 1 to read as follows: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed "(5) Debt Reduction 50,000,000 To be agreed by Plan the Bank, the Guarantor and the Borrower, subject to paragraph 7 below" (iii) Paragraph 5 (a) is amended by deleting the first word "No" and substituting the following therefor: "Subject to the provisions of paragraph 7 hereunder, no". (iv) New paragraphs 7 and 8 are added to read as follows: "7. If an agreement by the Bank, the Guarantor and the Borrower for the use of the portion of the proceeds of the Loan designated for the implementation of the Debt Reduction Plan shall not have been entered into by May 31, 1990 or such later date as approved by the Bank, then the amount of $50,000,000 under Category 5 shall, at the request of the Borrower and the Guarantor, be reallocated to Category 1 for Part A of the Project. 8. The provisions of this Schedule are without prejudice to the provisions of Section 3.05 of the Loan Agreement." E. Schedule 2 Page 3 (i) The objectives stated in the first paragraph are amended by deleting the word "and" at the end of clause (c) thereof, by deleting the period at the end of the paragraph and substituting the following therefor: ";and (e) if so determined under Section 3.05 of this Agreement, to assist the Guarantor in the implementation of a Debt Reduction Plan." (ii) A new Part D of the Project is added after Part C to read as follows: "Part D: Debt Reduction Plan Assistance to the Guarantor in the implementation of a Debt Reduction Plan which, in the judgment of the Guarantor and of the Bank, shall meet the requirements of the Bank's support of debt reduction." II. Guarantee Agreement A. Preamble (i) A new paragraph (B) is added after paragraph (A) to read as follows: "(B) it is contemplated that the Guarantor may require assistance from the Bank in the implementation of a Debt Reduction Plan; and" (ii) Former paragraphs (B) and (C) are relettered as "(C)" and "(D)" respectively. B. Article III (i) A new Section 3.07 is added after Section 3.06 to read as follows: "Section 3.07. The Guarantor shall, if so determined under Section 3.05 of the Loan Agreement, carry out Part D of the Project with due diligence and efficiency and in conformity with appropriate commercial, administrative and financial practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project." (ii) A new Section 3.08 is added after Section 3.07 to read as follows: "Section 3.08. The Guarantor shall take all actions as shall be required for implementing the provisions under Section 3.05 of the Loan Agreement." Please confirm your agreement to the foregoing amendments by signing and dating this letter in the spaces provided below. This Amendment may be executed in three counterparts, each of which shall be an original. Upon your confirmation, please return one fully executed original to us. This amendment will be effective as of the date of this letter upon receipt by the Bank of one fully executed original of this Amendment. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Page 4 By /s/S. Shahid Husain Vice President Latin America and the Caribbean Region CONFIRMED: UNITED MEXICAN STATES By /s/ Authorized Representative Date: February 4, 1990 NACIONAL FINANCIERA, S.N.C. By /s/ Authorized Representative Date: February 4, 1990