Draft memorandum re : public external debt of Mexico

 No. E-206 CONFIDENTIAL 67135 This report is limited to those members of the staff to whose work it directly relates. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DRAFT MEMORANDUM RE: PUBLIC EXTERNAL DEBT OF MEXICO January Z9. 1952 Prepared by: Carel deBeaufort Alfonso Ma.nero Irving Reynolds  Table of Contents 1. Introduction 1 U. Agreements of 1942 and 1946 and Present structure of the Fublic External Debt 1 III. Objectives of a Refunding Plan :3 IV. Eases for a ~efunding Operation 5 V. Recommendations on Refunding the Public Jllxterna1 Debt ? VI. lUscel1aneous 12 Tables I. Treatment of issues under the proposed main Refu.~d1ng Plan. I-a~Treatment of issues under the proposed Alternate Refunding Plan. II. Total exchange adjustment payments and total reduction of principal to be made on all outstanding assented bonds under the proposed main Refunding Plan 1tTi th a. 4!% coupon. IL~a.Total exchange adjustment payments and total reduction of principal under the alternate Refunding Plan converting issues Nos.~. 2 and :3 and 14 through 26 into a.n issue with a 4!% coupon and issues 4 through 13 and 27 and 28 into an issue 1:1i th a 2!;b coupon. II!. Titles of bond issues.  (DBA.FT) PU3LIC EXTEill.r~ D::ElET OF l'iEXrCO I. INTRODUCTIOH (1) During his visit to Hexico in the beginnlong of July 1951 the Bank's President discussed with Dr. Ramon Beteta. Minister of Finance, and Dr. Lic Carlos ~ovoat Director General of the Bank Of Mexico, the present structure of 1·;exico l s Publio External Debt. On September 12. 19.51. the ioIinister of Finanoe agreed that lithe :Bank should undertake a study of the old debt, including its direct and guaranteed portions and also the old railways debt, which formed part of the Agreements dated November 5. 1942 and February 20, 1946 respectively, and also of the ~mendments to such Agreements in order to give recommendat1ons to the Federal Government regarding the possibility of a refunding of such debts". (2) Bank representatives visited l1exico City in October 19.51 for discus- sions with the Director General and the i·fanaging Director of the :Bank of r,1exico and official s charged ,·,1 th the administration of such debt, II • AGBEEi'1:fl!l;JT S OF 1942 ° 11ID 1946 AlID PRESElifT RTRVPTURE, 9~ i ,tHE PUBLIC :fXTWY:tAL DEJ?T (3) The Hexican Government and the Internat1ol".a1.Committee for :Bankers on Mexico concluded on November 5, 1942 an Agreement containing a settlement of three secured Government issues and tt-re1ve un!;lecured GoverIUllent, State and jciunicipal issues and Tehuantepec Eationa1 Railway Bonds. On bonds whic~ were registered in accordance with a Decree Of 1942 and assented under the Agreement, interest pay- ments were to be made at rates set forth on Schectule :B of the Agreement. Assenting bonds were to be retired at the rate of one ?6S0 per dollar of nominal principal. :Bondholders vJere to have the choice betvleen payment in dollars or in pesos at the fixed rate of $1 for each 4.85 pesos. Retirement of the secured issues was to commence in 1948 and to be completed by January I, 1963. A sinking fund was to provide for retirel"lent of at least five million dollar,? face amount of bonds eaoh year. The remaining issues 1tlere to be retired during the period January 1. 1963 to January 1. 1968 but 1.-Tould not be redeemed prior to the retire- ment of the secured issues. Although the 1942 Agreement does not so state, it appears from a state~ent in the first Paragraph of Page 51 of the Registra~ion Statement covering the 1946 Agreement, that retirement by the sinking fund of bonds with a face amount of at least five million dollars annually was to continue until 1968 and would thus apply to the remaining issues. Redemption of any of these bonds was to be by lot and might not be by issue. (4) On February 20, 1946 ti:1e Hexican Government and the International Committee of Bankers on Hexico concluded another .Agreement containing a settle- ment of thirteen bond issues of the lfationa1 Raihrays of }4exico. :Bondholders were to be offered a choice betwoeen "Plan All and IIPlan :B" t all payments under both Plans to be made in dollars or in pesos at the fixed rate of $1 for eaeh 4.85 pesos. ..,' / ...  (DRAFT) - 2 - (5) Plan A would ~rovide for redemption at the rate of one peso per dollar of nominal principal. The bonds were to be retired over a period of t-;'1ent-r-nine ~7ears by an annual sinking fund of 1.78/f ~ ~ n of the aggregate modified principal amOtk~t plus interest at the rate of 4.35p per year on bonds held in the sinking fund. Interest payments on the different issues '\'Jere to be made at rates set forth on Schedule B of the Agreement. Plan A bonds might be redeemed other than by the Sinking Fund, by redeeming an entire issue or part of an issue by lot. (6) Plan B would provide for cumulative bonds '''.fithout current interest payments. .tl. sinking fund i/lould permit retirement of the bonds on an ascending scale over a period of hrenty...nine years starting at about t"mnty-one cents per dollar of principal until par is reached in 1974. (7) "-in ,,1.mendment dated ~Tovember 24, 1949 to the -de,'l'eement of February 20. 1946 ",ould provide for the s::?reading of interest and sinking fund payments due for the period January 1, 1946 to December 31. 1949 over the period January 1, 1950 to October 1. 1953. (8) Registration under the 1942 Decree and the possibility for assenting to the 1942 and 1946 .ligreernents are now closed. (9) As a result of the 1942 and 1946 Agreements the assented Public External Debt nOvl matures on three dates, viz.: the secured Government debt on January 1. 1963; the unsecured Government, Stat(7 and 14uniei'!)a1 debt and the Tehuante)?ec Hational Baili-lay bonds on .Ta.nuary 1, 1968 and the :ifational RaUl/JaYS Debt on January 1, 1975. (10) There has been no unification of debt under these Agreements beyond the establishment of these three maturities. as a result of the modification of principal, the denomination of most bonds has becOP9 extreMely irregular, re.nging from $0.412 through $1.062; $2.493; $3.093; $4.251; $9.278; $16.619; and $20, to $20.619 and multiples of these amounts. (11) The 1942 and 1946 agreements did not provide for the issue of new bonds either (a) on exchange for old bonds or (b) in consolidation of the small denominations resulting from the modification of the principal amount of the old bonds. The bonds outstanding are therefore mostly those \\lhich ",ere originally issued and \-lhich must nOvT be accompanied by a Unag ll as proof of the registration Ullder the Registration Decree of 1942 and be stamped as proof of assent under the 1942 or 1946 4greements. In some cases additional sheets of ooupons have been annexed to them. (12) Q,uotations for assented bO:"1ds on the :i.~e'·l York Stocl;;: Exchange are on a "nat" basis p~r unit of old ::.)rincipal amount. For example, a quotation of 16 3/4 for the 5/:' Consolidated External Gold Loan of 1899 means that the market price of a bond ",ith an original face va.lue of 1;200 or $970 '\10'tlld be $167.50. The modified fa.ce value being $200, a qu~tation on a percentage basis of the new face value ,",auld have amounted to 83 3/4;0. ... / ...  - 3 - (13) The uncustomary denominations and the smallness of many of them. the odd interest rates. the confusing appearance of the bonds and of the quota- tion on the iTet., York Stock Exchange all combine to affect the marketability of the "bonds. (14) As long as this situation preva~ls. Mexico is handicapped in re- establishing its credit in the international capital markets, 1I1hich is unfortu- nate in viet'! of its strict fulfillment to date of its obligations under the 1942 and 1946 Agreements. as v,ell as other commitments undertaken by Mexico since 1942. (15) Another qondition of the 1942 and 1946 Agreements \'1h10h must be considered is the reinstatement clause providing that in the event of the failure of Nexico to make the payments required by the respective Agreements. all rights of the assented bondholders in respect of principal or interest not theretofore paid or for which payment has not been provided for. shall revive and thereafter. such bonds. to the extent so unpaid or unprovided for, shall be entitled to their full original cOntractual rights. (16) Administratively the complicated structure of the External Debt calls for extraordinarJT outlays. It is estimated that the fiscal agencies' fees and salaries of the staff engaged in adMinistering the External Debt in r.fexico City. iie','l York City, London and Paris aggregate bet\'1een $150,000 and $200,000 per year. In addition there are office expenses. safe deposit charges, commis- sions, postage etc. Total e~enses are completely out of proportion to the si~e of the debt being serviced. III. O:BJ:iJCTIVES qP .do ,REfPlIDIHG PLAlif (17) The combination of factors hindering the re-establishment of Mexico's credit in the international capital markets has been described in the preceding Part II. Efforts to re-establish I4exico l s credit by a refunding operation can- not be wholly successful unless all these factors are taken into account. The objectives must therefore be: (18) a. Simnllfication of ~ebt Structure The debt structure must be simplified, not only by doing av~Y with the unoustomary denominations of bonds but the small denominations as 11,e11 shOUld be either retired or combined SO as to create bonds '\tIith face va.lues 'ltthich a.re acceptable as trading units under the rules of the Stock Exchanges of New York and other important trading centers. Coupon rates must be simplified as well. In order to create issues which are suffiCiently large for trading purposes, the present issues must be combined into a limited number of new issues. b. Unchanged Overall pa~ents Any refunding plan of the scope herein contemplated shoUld be based on the overall payments, provided for in the 1942 and 1946 Agreements, on the present three maturities, January 1, 1963, January 1, 1968 and January 1. 1975, and any lJrOl)osed increase in interest payments ':lould have to be compensated for by a reduction of principal amounts.  • (DRAFT) -4- In the interest of bondholders on the other hand. a refunding plan should provide as vTell that overall payments on each ne\1I' bond ,-rill not be less than the amount to which the present holder ",ould be entitled under his exi stine; bond. c. Provision of a Beag,v Mari£et for the Bond! One of the condi tiona to be fulfilled ~n order to create a ready market for the bonds is the simplification of debt structure, described in para- graph (18) a. In addition, old bonds and small denominations of the new bonds should be exchangeable for new $1,000 bonds engraved in accordance "lith lJe,., York stook Exchange requirements and the new $1,000 bonds should be officially listed . after sufficient exchanges have been made. Q,uotations for the new bonds ",ould sho.,., the ])rice of the bonds in percentages of their ne't" face value. The Fiscal Agents should be authorized by the Bank Of Mexico to offer their services without charge to bondholders in purchasing or selling bonds of small denominations whether by matching purcrAses and sales or by arrange- ments through brokers for the pur,ose of consolidating bonds of small denomina~ tions in;;,) units traded on the exchanges. d. Induoements to Bondholders The inproved 'marketability of the bonds provides an important inducement to bondholders to assent to the ref~ding operationr However, this i~ducement may not be sufficient to overcome the customary inertia of bondholders in connection ,,,ith exchange offers. Small cash payments necessary to be made in settlement of exchange adjustments due to bondholders, may constitute a further inducement of sufficient importance to cause bondholders to act. vthenever practicable, cash payments should, therefore, be calculated so as to form an attractive inducement. The use of scrip in settling eXChange ,adjustments would. not be attractive to the present bondholders; it would increase expenses of administration; it would in- troduce new complications, and it should therefore be avoided. e. Surrender of Rights of Reinstatement on Defaul t by Mexico in ,considerat~on of l'fe~,tire Pledge Clause The reinstatement clause described in Paragraph 15 is of no pra- ctical value to the bondholders, As a fair and reasonable substitute for such reinstatement clause and consistent ,<11th Mexico· s undertakings with current dollar lenders. it is suggested that a negative pledge clause be included in the refunding bonds. $uch negative pledge clause would provide tba,t if IvIexico here-.- after secures any of its external debt these bonds ,.,ill be entitled to share 'P8:ri :pa:ssu in any such security. f. Re.duction of the Co~t ,ot ,Adl\\i.aJstering the Debt Another objective, not conneoted with the rehabilitation of Me~icols c~edit, should be a reduction of the cost of administering the debt. Once the initial phase of a refunding operation is completed, the simplified debt structure will lead to considerable savings of administrative costs. To illustrate. the administration of a normal issue of $100 million in the United States costs $18,000 per year. ..,/ ...  (DRil.FT) - 5- IV. BASES FOR .1. REF'Ul.IDli~(} OPERATIOn' (19) The objectives listed in Part III make it desirable that all exist- ing issues be converted into as few net" issues as possible so that in creating a broad market sufficient volume "'ill be available for active trad~ng. In view of the three existing maturities. which should not be changed, the net" issues "lould have to consist of three rnaturi ties corresponding to the present three maturities. (20) In order to be effective as a demonstration of 1,fexico I s credl t. the refunding issue should be given a coupon rate as near as possible to the yield basis which the market t'lou.ld be expected to accord to it. Yields to maturity of Maxi can issue s 'loTi th a 1963 rna turi ty are around 7 1/8% in London and around 8 1/8% in New York. The new issues, free from the confusing characteristics of the pre- sent issues, might be expected to be quoted as a slightly lO\'ler yield, say 6~7%. (21) The average coupon rates now applicable to the various issues amount to 5.585% for the three seoured Government issues; 2.773% for the unsecured Government, state and Municipal issues and Tehuantepec national Bailt·ray bonds, and 4.35% for the National Railway Debt, Plan A. (22) A change of these coupon rates to a 61~7% level ,,,ould C/:l.use a con- siderable reduction in all principal amounts, to which bondholders might not readily agree. A ne'll1 coupon rate should therefore be selected \-,hieh \'1ould be suffioiently high for the market but on the other hand not so high as to cause unduly large reductions in principal. (23) Once an acceptable ne'll1 coupon rate has been selected, a calculation should be made for each bond of the present cash value all. a compound interest basis of total payments due during its average life under the Agreements in force at present. A similar calculation should be made using the new coupon rate. (24) On the basis of these calculations the terms of exchange of old bonds into new bonds ,",auld be decided for each issue. The exchange should be on a par basis '1rhenever the preElent coupon rate of an issue is higher than the new coupon rate and the e~istlng denominations of the oouda are in round figures and large enough to warrant exchanges. In all other cases the prinoipal amounts must be modified to take care of an increase in coupon rate and a conversion into acceptable denominations. (2S) ~change adjUstment payments should be calculated for each bond issue, SO as to make the present value on a compound interest basis of the total of prinCipal, interest and exchange adjustment payments due during the average life of the new bonds equal to the principal and interest payments due during the corresponding period of the old bonds. For example: ... / ...  (DRAFT) - 6 - Case 1: Assume Issue Ho .1, Republic of Mexico .5% Consolidated External Gold Loan of 1899, is to be refunded into a ne'll' issue l\Tith a 4i% coupon. The present coupon rate being .5.77.5%. the exchange can take place on a par for par basis. The calculation would be: Present value 11 of payments due during the average life (8 .85 :z~ar,!illof the old ~20 ponds: i principal $ 13-)5 interest $ 8'28 Total $ .:.21·63 Present value 11 of payments due during the average life (8.85 ;ye,ars )of the ne,,, ~20 bonds! principal $ 1J·;5 interest $ 6.45 Total $ 20.00 The difference between the two totals. amounting to $~.83 represents the exchange adjustment payment due on each $20 bond. Case 2: Assume Issue !~0.4, City of i"lexico 5% Sterling Loan of 1889. is to be refunded into a ne'"J issue ''lIth a 4!% coupon. The present coupon rate being 3.442%. the principal will have to be modified. The calculations would be: Present value 11 of payments due during the average life (14 ;v:ears)of the, old bonds -per ~100 of ;J?t;'incipal princilJal $ 54.00 interest $ 35.12 Total $ 89.12 Present value 11 of payments due during the average life (14 yeatrs) of the De'" bonds per $100 of-ori,ncip§:l principal $ 67.74 interest $ 32.?6 Tota.l $ 100.00 The difference behleen the h/o totals, amounting to $10.81 indicates the over payment to be made to bondholder~ on account of the interest revision. In order to rectify the over payment the principal should be reduced to 89.19% of its present value. ! ., i, t ( ,It ! I I ; . ", "iiCI, i , [ .PJ.;,; 4. ,. I r I, . It, V Computed at 4i% p.a.  (DBAFT) -7- The issue consists principally of bonds of $83.093, '"hich "1ould have to be reduced to $74.11. Assuming the new bonds to be in denominations of $20. the holder of an old $83.093 bond ,,,,ould receive under the e~change! 3 new bonds @ $20 $ 60.00 a cash payment of $ 14.11 Total $ 74.11 (26) The Problem of Small Denominations A 'special problem i~ posed by the large number of small denominations since it would be uneconomical and impractical to e~change denominations under a certain minimum into new bonds. It would appear that ~20 bonds, which are pre~ sently being quoted on the Paris Stock Exchange. might be the smallest bonds to be issued under a refunding operation. Eut the servicing of $20 bonds being al- ready relatively expensive, it ,<{auld be advisable to induce the holders of these small bonds to have them combined and e~changed in due course into larger denominations. (27) Presumably one \1'a.y in "/hieh this could be done is through arb! trage transactions. Once a market is established for the refunding iSSUe in New York, prices in :rIe'" York may rise to a level on which dealers may find it 8,ttractive to purchase small bonds in Europe and have them sent to the United States to be combined and exchanged into $1,000 denominations. (28) Providing bonds of small denominations with a limited number of aoupons (say, for 3 to S years) may be another method to induce holders to combine and exchange them into larger bonds prior to the exhaustion of the coupons. (29) If $20 is to be the smallest denomination of a refunding issue. a solution will have to be found for the great number of denominations smaller than $20. As calls for rede~~tion could not be restricted to the small denominations outstanding, it would appear tl1at in most cases purchase for retirement of these small bonda at their nominal value would be the most effective way to deal Hith them. ;'ihere this \'1ould be too expensive, special methods "rill have to be adopted after consultation ,~th the bondholders' representatives. V. BECOW·1EiWATIOHS OlT RErtrNp UTG , rEE ,pm!y H,WElUtAIt D~T A~ Main Refunding PIau (30) The highest coupon 'Ir/hieh eOu1d be offered on a refunding issue, \oTith- out causing u.l1duly large principal reductions, ap')9a.:;9 to be ~%. It is there- fOre recommended that all issues be refunded on a /+tIc basis. The new issue would be divided into three series preserving the present maturities: One with a January 1.196) maturity. another ldth a January 1,1968 maturity and the third with a. January 1, 1975 maturity. Plan:B bonds would not be excha~ed into any of these series; they are dealt with separ~tely ~der D. The present issues a.re to be cOAverted into the series with a corresponding maturity. Recommendation~ as to sinking fund provisions of the new issue are set forth in C. The bonds would . . • / .< . .  (DRtl.FT) - 8 - carry a negative pledge clause instead of the present reinstatement clause. The denominations of bonds of the refunding issue ''lould be $20. $100, $500 and $1,000; all present small bonds which 1rlould not be exchangeable 'vould be purchased at their nominal value for retirement. 11 (31) Al though bonds with a 4?t~!; coupon would s~ll at a condderable di s- count from par if their price were to refleet the 6-7% yield level mentioned in Paragraphs 20 and 22, it is expected that the New York Stock Exchange quotations in due course i:lould be in line wi th quota tiona of many other countrie a t bonds and Mexico 1 13 credit 1r!ould thus be re-estab1ished on a comparable level. (32 ) On a 6i% yield basis, the 4!% 1963 series ,,,,ould probably be quoted at about 86 3/4, and the 1968 and 1975 series at about 81 3/4. This compares "Ii th the fol101,ling He", York quota tiona and yields as 'Oar December 31. 1951 of other bonds: Current Yield to Price ~ield maturity; 3 3/8% AUstralia 1962 82 1/2 4.09 5.51 3 lZ210 Australia 1967 84 1/8 4.16 5·38 3 3/8% Brazil 1979 64 5.27 6.08 3% Colombia 1970 53 1/2 5.61 7.74 4 1/2% Denmark 1962 77 3/8 ,5.82 7.74 3 1/2% El. Salvador 1976 64 5·47 6.44 2-3% Republic of Italy 1977 42 1/2 4.'71 3 3/4% The Nether- lands 1957 93 1/2 4.01 5.16 4 1/4% lil"onlay 1965 99 1/4 4.28 4.32 4 1/8% Ul'1lgUay 1979 93 5/8 4.41 4.54 (33) Overall cash payment s to be made for exchange adjustment s 1rlould aggregate about 7.37 percent and retirement of all snaIl bonds would aggregate about 3.03 percent, in each case of the total outstanding amount. On the whole these cash payments vlould appear to be suffiCiently large to induce bondholders to convert. The distribution of payments. hO'·leVer. amongst the various issues is uneven; payments are especially low on the railway debt. This situation is unavoidable and the lack or smallness of cash payments in a m1norlty of issues may discourage holders from exchanging thelr bonds. It is probably true that holders of bonds of those issues will exchange if the refunding operation is othenlise successfu::t. Holders ''fill then certainly find i t advantageous to ex- change their bonds into bonds enjoying a mUch better standing in the market. (34) Some issues pose special prOblems. these are: resuS! No .8 Present denominations of bonds of this issue are; $4.251; $21.25.5; $42.510 and $212 •.5.5. The interest payable at present being 2.823%, conversion into a ~ issue vlould caUse a yrincipal reduction of 17.17%. As a result, the prineipal of the bonds ,-,ith a $21.2.55 denomination of "",hlch a large number is outstanding, would be eut belov! the $20 minim'Qln and ''lould therefore have to be il As lss~e No.25. Plan A,consists mainly of denominations ,,'hich are 'too small to be exchanged. it is recommended that all bonds of this issue be purehased at their nominal value for retirement. .../ ... -  -9- retired in cash along vri th the bonds vIi th a $4.251 denomination. For this reason total cash payments on this issue would amouut to more than 74% of the total amount outstanding. It "Tould therefore appear that in this case an exception should be made by making sub-bond$ of a lesser face value than $20 available. In issu.ing sub-bonds vtith a $10 denominatioll cash payments "rill be reduced to about 19% of the present principal amount outstanding. Issues Nos.2 through 13 Cash payments ~n the'se issues would range from 36% to 77% of the outstanding amounts. Sinee a total of less than $100.000 is outstanding on these issues, it is recommended that all outstanding bonds be purchased at their nominal value far retirement. Issue No.28 The number of outstanding bonds of this issue being very small, it would appear advisable to purchase them all at their nominal value for retirement. Issue No.14. Plan A The $20.619 denomination of the bonds of this issue represents 98% of the outstanding issue. The change of cou:90n rate vauld cause a reduction from $20.619 to $19.46. This amount is so near to the minimum of $20, that it would appear unnecessary to retire all bonds of this denomination. On the other hand it would be inadvisable to ask hold~rs to make a cash payment of $0.54 per bond at the time of exchange. It is therefore recommended that the $20.619 bonds be exchanged fOr $20 bonds from \'lhich the first two semi-annual cou!'ons shall have been detached and the difference be paid to the holder at the time of exchange.V lasse No.18. Plan A The change of coupon rate 1rmuld cau,se the tlilO denominations of this issue to be reduced from ~l03.093 and $206.186 to $97.31 and $194.62 respectively. The case being similar to that of Issue No.l4, it is recommended that these bonds be exchanged for $100 bonds (2 of whlch are to be issued for each old $206.186 bond) from which the first two semi-annual coupons shall have been detached and the difference be paid to the holder at the time of exchange. 11 (35) A refunding on the ba~is of these recommendations is illustrated in Table t. B. Alternative Refunding ,I ,I Plan . for 4 Unsecu~ed - i ; _ Debt and Internal ,_ I. and _ • State Debt (36) Refunding on a ~% basis causes principal prepayments and redUctions in the group of Unsecured Debt and Internal and State Debt (issues 4 through 13 and 27 and 28) ranging from 22.40% to 62.J4%; the average of all issues being 37.64~. There is a possibility that for tax or other reasons these principal prepayments and reduetions may deter holders from exchanging their bonds. not- withstanding the fact that it w1l1 be made clear that the reductions stem from interest rate increases and that the present total value of principal, ~nterest and exchange adjustment payments on the new bonds will in each case be exactly the same as the present value of total payments to which holders are entitled under the 1942 4.bTeement. 11' If the excnan.getakes place befo~e Oct~ber '1: 19Sj, additional 'paYments due under the Uovember 24, ~949 Amendment to the 1946 .agreement (see paragra .h./7.)•• ..p shQuld be taken into account.  (DRAFT) - 10 - (37) A refunding of these issues into a new 2!% issue lITould eliminate this problem. Table Ia indicates the basis on which such an exchange might take place. (38) In the circumstances \rlth a maturity at such a distant date. quota- tions on the :Tet1 York Stock Exchange for a 2!% issue ,.nth a 1968 maturity can not be expected to rise much above a 50-60% level. Such an issue would therefore be unSUitable as a popular demonstration of Mexico's credit. For this reason the only consideration should be whether it may reasonably be expected that bondholders will seriously object to the principal reductions to be made under the 4i% re- funding plan. c. Retirement Provisions for Re~unding Issue (39) In respect of the 196) and 1968 series of refunding bonds, the sinking fund covenant of the 1942 ~greement. as enlarged by the registration statement (see l?aragraph 3), ",ould be continued to the end that Mexico '!Ilould con- tinue to retire at least $5,000,000 faee amount of originally issued bonds each year until 1968 but 'vould be given credit on such amount (a) at the rate of $4,850 at any time up to 1962 for each $1,000 principal amount of refunding bonds of the 1963 series then tendered to the sinking fund, and (b) at the rate of $4.850 at any time beginning with 1962 for each $1,000 principal amount of refund- ing bonds of the 1968 series then tendered to the sinking fund~ (40) As to the 1975 maturities, provisions for Plan A of the 1946 Agree- ment can be taken over, providing for an annual cumulative ainlcing fund con- sisting of $17.84 for each $1,000 of revised prinCipal amount plus interest at the rate of 4.35% per annum on the principal amoq.nt of ~.ll refunding bonds acquired by the sinking fund on or prior to the preceding December 31. D. Refunding Plan B Bon4s (41) Not all considerations making it advisable to refund Plan A bonds are applicable to Plan B bonds. The original face amount of the latter bonds has been preserved under the 1946 Agreement so th':!.t ,{Fith the exception of about 2i~ of the outstanding amount, consisting chiefly of bonds converted from sterling into dollars at the rate of 4.03. all denominations are in round and acceptable amounts. and a refunding of these bonds would not reduce the cost of administer- ing the debt. The nost important objective making it desirable to refund Plan] bonds would be the elimination of the re-instatement clause. The reasons for the original adoption of Plan B must again be taken into account in connection lrJith any refunding of Plan B bonds. The British were un\villing to accept a reduction of principal but \'1B.ived any interest '!IIith the result that capital gains on Plan B bonds are tax free to 3ritish bondholders. It should be pointed out that due to scheduled retirements under the Plan B Sinking ?und only a small percentage of bonds ,·rill be outstanding by the maturity date in 1974. and thus be entitled to the full original face value. ... / ...  (DRAFT) - 11 - (42) Possibilities for a Plan B refunding might include, (a) the cash payment at the time of exchange of 10% of the then redemption price. the new bonds having a face value of 90% of the surrendered bonds. or (b) the offering of a new appreciation bond into which all present Plan B bonds, whether belonging to Class A, B, 0 or D would be exchangeable at a yrice to be calculated on the ba~is of present values at the time of exchange. It is suggested that such cash payments should be at least 10% of the present ~edemption values. (43) The feasability of refunding Plan B bonds should be judged only after consultations with the bondholders' groups concerned. E. Disposition of Bonds "( \ Surrender~d f; d On Exchange (44) All originally issued bonds surrendered on exchange for refunding bonds shall be cancelled except that Hational Railroad Co. of Ivfex1co Prior Lien 4tfo Gold Bonds due October 1, 1926 SO surrendered shall not (so long as they must. in the opinion of liexico, be kept alive) be cancelled but may not at anytime be used for siukin6 fund PUfposes. F. Pilot Refunding I@sue (4,) Although it would be possible to refund all issues at once it is suggested that consideration be given to a pilot refunding issue. With such an issue the first steps "lould be taken to re-establish Mexico I s credit on the international capital markets. Horeover, it would give a good indication of bondholders' reaction to a refunding and if successful it would facilitate the refunding of other issues. By a pilot refunding issue ilexico '-lould not be com.-, mitted to too broad a program ",ithout testing the bondhOlders! reaction. (46) It is recommended that issues l, 2 and 3 be used for the pilot operation. These issues are not subject to principal reductions if refunded on a %-% basis. Horeover, none of the present denominations are too small for ex- change. A further consideration in favor of such a pilot operation might be that on the basis of the exemption of the 1942 Agreement the costs and expenses of registration of this pilot o}Jeration ""ith the Securities and Exchange Commission could be aVOided. (47) As $20 bonds constitute a great part of the outstanding amount of issues 2 and 3, it is suggested that an active campaign be conducted 11li th bond- holders to exchange and combine these $20 bopds. It vlould seem that the value to i,iexico of such pilot refundins issue "lould be measurable by the number of such $20 bonds so exchanged and combined. (48) The pilot refunding issue calls for cash payments of 8.94% on issue No.1, 1.09% on issue No.2 and 17.26% on issue NO.3. A comparison between the ex- changes under the pjlot refunding plan in each issue, wll1'-ahow the extent of the effect of cash payments. If exchanges of bonds of issue No.2 shall be sub- stantially less tl~n the bonds exchanged of the other issues, and the reason for the difference shall be tho'Ught to be the meagreness of cash payments offered for issue No.2. then it might be necessary to review the bases on which the remaining issues, especially those of the ral1v~ys, would be refunded pursuant to any general refunding. . ... / ...  (DBAFT) - 12 - G. Effect of Refunding on Service Payments and E;penses (49) The present value of total payments to ,,,Mch bondholders are now entitled and those due under the refunding is~ebeing exactly equal, the re- funding "'ill only bring about a shift in time of payments by the Mexican Govern- ment. To the extent that exchange adjustment payments are being made, future interest and principal payments will be reduced on a compound interest basis. <so)Tables II and IIa indicate total exchange adjustment payments to be made if all bonds assented to the 1942 and 1946 Agreements are refunded. These tables also show total principal reductions resultlngfrom such refunding. (51) In the case of the pilot issue, exchange adjustment payments would aggregate 8;h on the outstanding amount of bonds if all assented bonds ""ere ex- changed. If all issues are refunded On a 4i% basis exchange adjustment payments and payments for the retirement of small bonds would aggregate 11% on the out- standing amount of bonds. (52) The refunding operation "'ill cause outlays for commissions, fees. engraving and printing of bonds. etc. Once the refunding is completed, however, the cost of administering the debt will decline considerably, offsetting in time the refunding costs. (53) Bonds to be issued under the refunding operation will have to comply with StoQk Exchange regulations. Since the smaller denominations will not be traded on the New York stoc~{ F.;:x;change there may not be need for fully engraving all bonds. Bonds with an engraved border coating only one-sixth of the price of a fully engraved bond may be ~itable for the smaller denominations. H. Manner of Offering the :Plan 1 , ,f • (54) The Hexican authorities requested the Bank's representatives not to cons~t bondholders' groups in the present staGe of preparation of the Plan. In order to ensure a successful outcome of the refunding, it is imperative, however. that prior to any public offering or announcement consultations take place with the Interns. tional Committee of Bankers on i'iexico, the va.rious Bondholders Council s, Stock Exchanges, rating compalues and possibly others. (55) It is recommended that the offer to be made by the Mexica.n Govern- ment be open for a period of six months, at the end of "lhich time it should be extended - with recalculated exchange adjustment payments - for further 8ix- month periods. VI. MISCELLAl{@OUS A. Development of the Plan (56) The present study limits itself to recommendations on the bases of a Refunding Plan. Details of the plan should be worked out by the Mexican authorities. assisted by their accountants. la,,~ers and other advisors. Amongst other matters speeial attention should be 5iven to SEC req~irements and the in- fluence of tax regulations on the plan invario~s countries where the bonds are known to be held. In addition. consultations should be held with bondholders' representatives and others as recommended in Paragraph 53,  (DBAFT) - 1:3 - B. Bonds not registered under the Decree of 1942 and Bonds unassented to the, 1242 l1pd 1246, ~Q'e,ements. (57) The registration of bonds to indicate non-enemy o'lrTnership in accordance with Presidential Decree of Mexico dated A~st 4, 1942, has been closed. Non-registered bonds which amount to about 1:3% of the originally out- standing amount. are regarded as enemy-owned. Since these bonds cannot now assent to the 1942 and 1946 Agreements, they would be equally excluded frem the refunding operation. European countries have needed time to overcome disorganized co~ ditions existing at the end of the war. There may therefore be bonafide holders of bonds in these countries who have not had an opportunity to register them in accordance ~nth the Decree. (58) Neither have all registered bonds assented to the 1942 or 1946 Agreements. Under the 1942 Agree~ent assents amount to about 9?i% of registra- tions and under the 1946 agreement to about 9:3!%. (.59) WIthout throwing any $hadow on "iha.t has been decided upon before. it would $eem possible to meet this situation by issuing a Decree permitting any unregistered or unassented bonds to partiCipate directly in the refundlng operation under such suitable regulations as "Till discriminate against enemy-held bonds. O•.Proposed Recommendation of the Plan by the International :Bank rOt; Re9onstruqt1-o!l, and, ~evt;lo'DmeJtt , I " , " (60) Assuming that Mexico, on the basis of the foregoing. decides to offer a refunding plan for its public external debt, either covering all out- standing issues Or a pilot refunding issue, and that representatives of the Bank, at the request of Mexico. consult with and obtain the approval of the bondholders' council$ in the United States. Great Britain and France as to such refunding plan, it is recommended that the Bank should consider the issuance of a state- ment at the time of the public offering of such refunding plan, to the effect that the Bank had participated in the preparation thereof and deemed it acceptable to the bondholders.  DRAFT Table It TREATr.1.ENT OF ISSlT.ES UND:~R TEE :;?ROPOSED MAIN REFUNDIHG PLAN 11 .. Page l. Position under 1942 Position under Refunding Plan Comparison of present position ,-lith Refunding Plan or 1946 agreement (oer_ :.plOj)~!_j)rJ:Ls~_n.:t r_edemntion ~vcvl'Ue) Present values on a 4- 1/2% COI;l])ound interest b~sfs_1Ulder: Issue Present Denominations J/ 1942 or 1946 agreement Refunding -olan In- Average In 10 of In- Average E:zchan::;e ado-. nC)). denom. J../ terest life of' In present terest Cash life of Princi- justment pay- Le s s COUJlon~ (redemp. pay- In- Princi- In- ments for re- rate bonds dollars denomi- rate bonds Total y value) (%) (years) nation (%) ment (years) pal terest pal terest vision of: cancelled (if any) Total (dollars) In- Princi- "- .. ---~--- __ . _ t_er_eitt__paJ,. (1) (2) (3) (4) ~--- -(6) (7) (8) (9( (10) (11) (12) (13) (14) (15) (16) (17) (lg) DIEEe T DE.BT 8.853 100.00 4.50 $1.79 8.853 67 •.74 $41.4C $109.14 $67.74 $32.26 $8.94 $108.94 ~:&~5 .1 20. 20 2 20. 8.853 20 100.00 4 •.50 0.22 8.853 67.74 )J.,34 101.08 67.74 32.26 1.09 101.09 .3 20. 6.90 8.853 20 100.00 4 .. 50 3. 45 8.8.5.3 67.74 49.47 117.21 67.74 32.26 17.26 117.26 4 83.093 3.442 14. 60 72.20 4.50 14.11 14. 54.(?:O 3.5.19 89.19 38.99 33.21 $16 .. 98 89.1B 5 103.095 3.104 14. 80 77.60 4.50 8.se 14. 54.cO 31.73 85.73 41.90 3.5.70 8 .. 24 85.84 6 103.093 2.755 14. 80 77.60 4.,SQ 4.68 14. 54.00 28.16 82.16 41.90 35.70 4.54 82.14 7 31.86 1.507 14. 20 62.77 4 •.50 2.14 14. 54.0~ 15.41 69.41 33.89 28.88 6.72 69.49 42.48 1.507 14. 20 47.08 4.50 9.52 14. 54.ce 15.41 69.41 2,5.42 21.66 22.41 69.49 53 .. 10 1.507 14.. 2( 37.66 4.50 16.90 14. 54.0~ 15.41 69.41 20.34 17.32 31.83 69.49 106 .. 20 1.507 14. 60 .56 .. .50 4.50 13.80 .14~ 54.()() 15.41 69.41 30.51 25.99 12.99 69.49 212.40 1.507 14. 120 56.50 4.50 27.59 14~ 54.00 15.41 69.41 30.51 25.99 12.99 69.49 8 21.255 2.823 14. 10 47.05 4.50 54.00 28.86 82.86 25.41 21.64 35.75 82.80 7.60 14. 12.2,3 42 •.51 2.823 14. 30 70.57 4.50 5.20 14. 54.00 28.86 82.86 J8.11 32.46 82.80 212 •.55 2.823 14. 150 70.57 4.50 25.99 14. 54.()~ 28.86 82.86 38.11 32.46 12.2,3 82 .. 8() 9 42 •.51 2.823 14.) 10 11 42 •.513 2.823 14.~' To be cOffi)letely purchased at yresent redeml)tion value 42.51 2.82) 14. 12 42.51 2.823 14. 13 42.5iL 2.823 14.J 27 83.095 2.768 14. o( 72.20 4.50 8.35 14. 54 .. 0{) 28.30 82.30 38.99 33.21 10.05 82.25 28 83.095 2.527 14. To be com_)letely l)urchased at present redem1Jtion value See footnotes at end of ta1)lfr.  Table II TREA.TrvIDHT OF ISSULS UlillER Tlill PROPOSED I',LAIlj IBFUNDII:1G PLAN !I - Continued ~ _P~ge 2 Position under 1942 Position under Refunding Plan Comparison of present position lJ/ith Refunding Plan or 1946 agreement (per $100 of present redemption value) Present . values' oria~4 l/Z'lg compound inter:es t - b-asls' under; .Issue Denominations. 1.1 1942 or 1946 agreement Refunding plan . Present denoID. 2./ In- Average In %of . In- . Average ~xchange . ad,- 1 no. 1'<\-1 ( red . emp. terest t life b of d I P re"'ent In '" terest Cash a life of .t'"rinci- on In p. i I n- Justment -pay- - 4 Less counons:!./ ~ r(~)e p ~- me~t~ f~r re- r111C - value)' onds a lars denomi- rate honds al t - t Total pal terest cancelled Total (dollars) 1" (years) nation (%) ment (years) p eres V1Sl.0n o~; (if aw) In- Pr1nc tere.st. .--'P~l ~UIL1VAY D~T _ pwSt~ 2l (4) (5) (6) (7) (8) > (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) 0.3r;i! 14 15 16 17' 20.619 206.186 20.619 l0.3,~093 .3.948 4.445 4.219 ~.333 13.·9 13..9 13.9 13.9 20 200 20 100 97.00 97 •. 00 97.00 97.00 4.50 4.50 4.50 4.50 5.4),.! 13.9 O.OJ 13.9 13.9 ,hG9'I>''-13.9 54.24 54.24 54.24 54.24 40.15 4.5.20 42.90 54~23 94.39 99.44 97.14 108.47 52.61 52.61 52.61 52.61 44.39 44.39 44.39 44.39 8.50 1.75 2~44 O~15 j~O() - ~.36 , 94.39 99.!t4 97.15 108.,() ,18 10~.093 3.950 13,.9 100 97.00 4.50 1.8iS.!13.9 54.24 40.17 94.41 52.61 44.391.16 4.36 94~40 19 8].093 3.776 1.3:-9 60 72.21 4.50 16.98 13.9 54.24 38.40 92.64 39.17 33.04 20.4, .... 92~64 20 10,3.093 3.358 13.9 80 77 .. 60 4.50 11 .. 29 13.9 54.24 34.15 88.39 42.09 35.51 10,,95 88~55 21 20b.J.86 ).703 13'.9 160 77.6() 4.50 29.38 13.9 54.24 37.66 91.90 42.09 35.51 14~25 91;85 22 206.186 3.210 IJ~9 160 77.60 4.50 18.30 1,3.9 54.24 .32.64 86.88 42.09 35.51 .... 8~.88 86 ...48 2J 206.186 4.938 iJ.9 200 97.00 4.50 ~/s.~3.9 54 .. 24 50.21 104.45 52.61 44.39 4.49 3~OO 104.49 24a 206.186 4.938 1.3.9 200 97..00 4,,50 &-.3:9,&,_",,13.9 54.24 50.21 104.45 52.61 44.39 4.49 3-...00 104~49 b 206.186 4.938 13~9 200 97.00 4.50 ~Js.w13.9 54.24 50.21 104.4.5 52.61 44~39 4~49 3-.00 104~49 d 206.186 4.938 1).9 200 97.00 4..50 ~/£.Y"13.9 54.24 50.21 104.45 52.61 44.39 4 •.49 3--r DO 104.49 25a 20 .. 62 4.854 13.91 b 206.186 5.333 1.3.9l c 92.78 5.02.3 IJ.9( (To be completely purchased at present redemption value) d ~4.93 4" 978 13.9) 26a 206.186 5.333 1J.9 200 97.0() 4.50 -6.-19J3.7/ 1 3.·9 54.24 . 54.23 108.47 52.61 44.)9 8.50 3.00 108 • .50 b fI Y See footnotes on page 3. '.  D1U\FT Table. I t FOOTNOTES . ____ J?age~ __ !I All computations are ~pproximate and are based. in each case. on the average life of the bond from January 1, 1952. gj For titles c£ issues see Table lII. :J./ Of :most issues bonds are outstanding in various denominations which are multi:;:;>les of each other. In most cases only one of these denominations 1s shown since all denominations of that issue receive identical treatment under the refunding plan. Ho\"ever J in certain cases, when changing into new denominations of even amount (such as $10, $20 etc.) it was not always possible to give identical treatment to the various denominations of a single issue. In such cases, all the denominations of that issue are shown. ~ In certain cases, for the sake of even amounts, the new denomination under the refunding plan was fixed as slightly higher than the redemption price which would be correct for the change in interest rate. As a result it is considered advisable to issue bonds which have two coupons detached and to compensate for the difference between the value of the detached coupons t on the one hand, and the new denomination minus the correct new redemption prieSt on the other hand, by a small cash payment, as given in the preceding column. jj The first two coupons on the new bonds will be detached. §j No bonds of this issue are outstanding. ~ IKt5hic~~~~ing ta~es place before October 1, 1953~ adQitiona1 payments due under the November 24, 1949 iUnendment to the 1946 Agreement should be taken NOTE: THE FIGURES SET FORTH In THIS TABLE HAVE BB}:n PREPARED BY THE STATISTIC.h.L SECTION OF TEE :BAlJK AHD SUCH FIGURES AHE BELIEVED TO BE lE1I.AJ3LE BUT THE :BAj:~: CAl'fi~OT GUARAilJ"TEi THE ACCUiiACY TFIlGm:OF.  Table 1-aJ TREATrvIENT OF ISSU3S UNDER THE PROPOSED ALTERNATE REFUNDING PLAN 11 DRJ...FT 1 Pa~e Posi~ion under 1942 Position under Refunding Plan Comparison of present position with Refunding Plan or 1946 agreement (per $100 of present redemption value) Present value on a 4 l~~1~2~ com12ound 1nter-es-tbasfs under. lssue Denominations JL 1242 or 1246 agreemen~ Refunding :glan - I ,Present In- Ezchange ad- no .. Avo rage In %of In~ Average jus tmen t pay- de ~ ( ::-- · t e r e s t In present terest Cash life of prinei- In- Princi- In- y life of Total pal terest ments for re- Total :r mp. rate bonds dollars denomi- rate pay- ment bonds pal terest vision of: value) {(1) nation (%) (years) (dollars) . 7° (years) In- prinei- terest 12a1 (1) (2) (;J) (4) (5) (6) (7) (8) (9) (IV) (ll) (12) (13) (14) (15) (16) (17) 1. 2~ 5..775 -a. 853 20 lOO.CO 4.50 $1 •. 79 8:853 $67.74 $41.40 $109.14 $67.-74 $32.26 $8.94 $108.94 2 2{).. 4 .. 65 8,853 20 100.00 4.50 0.22 8.853 67.74 33.)4 101.08 67.·74 32 ..26 1•. 09 101.09 ,3 2n. 6.. 90 8.. 853 20 100 .. 00 4..50 3.,45 8.,853 67.74 49 .. 47 117.21 67.74 32.26 17.26 117.,26 4 83,.{)93 _3..442 14.- 80.,CO 96.28 2",50 ~f.1+14. 70.77 40.24 111 .. 01 68.14 28 .. 14 11.CO $3.72 111.00 5 20.619 .3... 1c4 l4. 20 97 •.04 2.50 ~.or14 .. 70.77 36.29 107.06 68.68 28.36 7.07 3.00 107.11 6 1 () J.,;'()93 2.755 14. 100 97 •.00 2.50 ~'./Cl14. 70.77 32.21 102.98 68.65 28.35 2.99 3.00 102.99 7 3~86 1.507 1.4. zu- 62 •. 77 2.50 8.22 14. 'in 77 17.-62 88.39 44.42 18~35 2.5.80 88.57 4z..48 1.507 14... 30 70.62 2.50 7.62 14. 70.77 17~62 88.39 49.98 20.64 17.96 88.58 53.. 10 1.507 14.. 4c 75.33 2.5D 7.04 14. 70.77 17.62 88.39 53 •.31 22.02 13.26 88.59 106.. 2() 1.507 14_. 9C 84.75 2.50 4~07 14. 70.77 17.62 88.39 59.98 24.77 3 .. 83 88.58 212..40 1 ..507 14. 180 84.75 2.50 8.13 14. 70.77 17.62 88.39 59.98 24 .. 77 3.83 88 •.58 I 21..255 2"1:B2:3 14..: 20 94.10 2.50 ~.2.D'14. 70.77 .33.00 103.77 66.60 27.50 3.79 5.91 103.80 9 21.255 2 t 82J 14. 20 94.10 2.50 ~~.D'14. 70i'rt 33.00 101.77 66.60 27~50 3.79 5.91 103.80 10 42.513 2.,.823 14.. 40 94.10 2.50 2.5l~.{).14~ 70.77 33.00 103.77 66.60 27 •.50 ),79 5.91 103.80 11 21..2 55 2-t8Z) 14. 20 94 •.10 2.50 h:26 .;(.0," 14 It- 70.-77 33.00 103.77 66.60 27.50 3.79 5..91 103.80 12 21.255 2..,:823 14. 20 94 •.10 2.50 l-:;-26 ;2.0 (..14. 70.77 33.00 10).77 66.60 27.50 3 . 79 5.91 103.80 1) 21.255 2~62:; 14. 20 94 •.10 2.50 ~;t.o{.14. 70.77 33.00 103.77 66.60 27 ..50 3.79 5.91 103.80 27 16..619 2,768 14. 10 60.17 2.50 ~1./"'14. 70.77 3236 103.13 42.58 17 •.59 3.00 39.83 10).00 83.095 . 2,768 14. 80 96.28 2.50 ~5,S114. 70 .. 77 32.36 103.13 68 .. 14 28,,14 3.00 3.72 103.00 415.475 2,768 14. 400 96.28 2.50 ~::t1.li~14. 70.77 32.36 103.13 68.14 28.14 3.00 3.72 103.00 zg 16.619 2,,527 "14. le\ 60.17 2.50 ~'-i.7144 70.77 29 .. 54 100.31 42 .. .58 17.59 0.J2 39.83 100.32 83.095 2,527 14. 80 96.28 2.50 J-e&93 3b 14 It 70.77 29.54 100.31 68.14 28.14 0• .32 3 ...72 100.32 41.5.475 2,527 14. 400 96.28 2.5C ±5;;#6". 7114. 70.77 29.54 100.31 68.14 28.14 0.32 3.72 100.)2 See footnotes on page 2.  ~ Table I-a: FOOTNO'IES Paee 2 Note: Railway debt to receive the same treatment as outlined in the Ifrvlain Refunding Plan." y All computations are approximate and are based, in each case, on the averaGe life of the bond from January 1, 1952_. y For titles of issues see Table III •. JJ Of most issues bonds are outstanding in various denominations \"rhich are multiples of en.ch other. In most cases only one of these denominations is sho\'1n since all denominations of that issue receive identical treatment under the refunding plan. Ho,,,ever, in certain cases, when changing into new denominations of even amount (such as $10, $20 etc,) it l.1fas not alvlays possible to give identical treatment to the various denominations of a single issue. In such cases, all the denominations of that issue are shown. NOTE: THE FIGURES SET FORTH IN THIS TABLE HAV:j BL~~1T PREPARIJD BY THE ST.l~TISTICAL SECTIOIIJ OF THF. 13;11[: AIID SUCH FIGl.JRJ:JS ARE BjjLIEVED TO BE RLLIABLE BUT T~ BAlfJ{ CA.1J11JOT GUA~\JuJTE:2 THE ACCUP...ACY THEREOF.  ~ Table II: TOTAL EXCHANGE ADJUSTI.ffiJ.\JT PAnf~NTS fu,J) TOTAL HEDUCTIOJ.~ OF PR:q'JGIPAL TO BZ :;"IADE ON ALL OUTSTANDING A3Sirrr3D IDNDJ UND~R THE PROPOSE!) EAIN REFUNDING 1!PLJl..N HITH A 4k% COUPON .. ______~. __._ ______ . _,___.~ .._ __. .___._______ .!::::,f";.;;..:>o_l_ __ Circulation as of 9/30/51 Exchange adjustment pay- of bonds assented to ments to all assented bonds for Total 1942 or 1946 agreeme~~ Interest Frincipal ----~- reduction Issue No.,Y -\1)-- Origt~)l par . Revi_(~) par._ Ch{~r~~'---Y-~Y.[;to~- T(0-l_ . ___01.-l?f~)cipa~ DIRECT D2BT 1 ~ 36,342,214 ~:) 7,493,240 $ 669,896 ~.~. 669,896 2 30,002,294 6,186,040 67,428 67,428 3 22,113,672 4,559,520 786,973 786,973 4 5,208,372 1,073,892 ~;.; 182;,358 182,358 ' -298,454 5 15,316,200 3,157;979 606,442 606,442 1,000:,127 6 29,532,;00 6,089,175 276,425 276,,425 1,363,988 7 5,636,778 1,162,222 231,030 231,030 564,77/+ 8 15,525,690 3,201,173 976,012 976,012 1,48 6,326 9 140,103 28,809 28,8'09 28,809 28,809 10 78,144 16,113 16,113 16,113 16,113 11 29,299 6,041 6,041 6,041 6,041 12 28,392 5,854 5,854 5,854 5,854 13 73,443 15,143 15,lh3 15,143 15,143 27 2,894,346 596,773 177,058 177,058 259,768 23 489,645 100,958 100,958 100,958 100,958  Table II: TOTAL EXCHt~NGj~ ADJUJTHENT PAYTeNTS :'J>JD TOTAL .:ti.jDUCTION OF PJ1f1GIP!tL TO B~ FAD"::: ON ALL - DRAFT - Contd. OUT jTANDING A,3SZrJTZD BONDS UNDill THZ PR.OPOS.~~D H!-\.IN =illFUI~TIING .Y PLAN ~I ITH A 4f2% COUPON Page 2 Circulation as of 9/30/51 Exchange adjustment pay- .------- of bonds assented to !llen~ all_~_~f!.!!.~d bonds ~or Total 194~.or 1946 agr~~nents Interest Principal reduction Issue No,. Y Original pa.r Revised par changes revisions Total _ _ _o.....;;;.f.....E!.inc~Eal (1) (2) ----- (3) -,--- (4) --(ff-'--(6) (7) RAILUAY DEBT - PLAN A 14 ~I 14,625,500 ~ 3,015;567 $ 52,607 ~;~) 52,607 ~ 90,532 15 2,349,000 587,422 14,330 14,330 17,624 16 12,·989,500 2,678,248 .;.. 3,272 3,272 80,405 17 4,566,000 941,443 r.~ 80,023 28,245 108,268 28,245 18 7,609,000 1,570,756 27,545 27., 5l t-5 47,069 19 1,520,116 313,426 64,035 64,035 80,443 20 2,294,500 473,093 51,790 51,790 105,973 21 760,000 156;701 22,329 22, .329 35,101 22 1,100,000 226,805 20,141 20,141 50,805 2.3 142,000 29-,279 1,315 818 2,193 878 24 a 36,000 7,423 333 223 556 223- b 79,000 16,289 731 489 1,220 489 d 321,000 66,186 2,972 1,986 1+,958 1,986 25 a 480,518 99,075 99,075 99,075 99,075 b 254,000 52,371 52,371 52,3fl 52,371 c 1,006,515 207,529 207,529 207,529 207,529 d 195,461 40,301 40,301 40,301 . 40,301 26 a 6,708,898 1,383,278 117,579 50,001 167,580 50,001 b Recapitulation Direct Debt Secured .88,458,180 18,238,800 1,524,297 1.,)~,+,297 Unsecured 50,057,072 10,}21,046 1,065,225 1,065,225 2,662,569 r : Internal & State 24)895,840 5,133,086 1,557,018 1,557,018 2,483,786 Total Direct Debt 16],411,092 33,692,932 2,622,243 4,146,540 5,146,355 Railway Debt 57,537 ,008 11,865,192 202,953 737,147 940,100 989,050 Grand Total 220,948,100 45,558,124 1,727,250 3,359,390 5,086,640 6,135,405  - DRAFT Table II: TOTAL EXCHANGE ADJUSTMENT PAYllliNTS AND TOTAL H.wUCTION OF PJ.INGIPAL TO BE }{ADZ ON ALL - Contd. 4ftS OUTJTANDING ASSENTM) BONDS UN~ER TH~ P20POSii:D ITAIN 3EFUNDllJG ]/PLJuIJ 1.jITH A COUPON Page 3 1/ All computations are approximate and are based, in each case, on the average life of the bond from Jan. 1, 1952 gj For titles of issues see Table III Nom: The figures set forth in tl1is table have been prepared by the Statistical Section of the Bank and such figures are believed to be reliable but the Bank cannot guarantee the accuracy thereof.  ~ Table II-a: TOTAL EXCHANGE ADJUST1illNT AN) TOTAL Rl~DUC'rION OF PHTI\lCIPAL UNDJ~R 'lHE ALTEIlNJ~TE PAYI\J=\~NTS 3EFUNDING PLAN ]/CONVERTING ISJUES NOS. 1,2 AND 3 AND 14 THROUGH 26 INTO AN ISSUE LITH A 4!% COUPON AND ISSU.8S 4 THROUGH 13 A1T]) 2'7 AND 28 INTO AN ISSU.l; i;:ITH A 2~% COUPON .. . . _. _ _ _. _ . ' Page,..L.~_ Circulation as of 9/30/51 Exchange adjustment pay- of bonds assented to ments to all assented bonds for Total 1942 or 1946 agreements Interest Principal reduction Issue No. Y _.OrigWf1-_J2a~_ Revised.E§.I' Chan~es r<:ciuctions __ ~-#~=h. ~.J2£.(n)iPaL- (1) ,2) (3) (11 (5) \u) 7 1 ~ 36,342,214 $ 7,493,240 ~~ 669,896 $ 669,896 2 30,002,294 6,186,040 67,428 67,428 3 22,1l3,672 4,559,520 786,973 786,973 4 5,208~372 1,073,892 118,128 $ 39,974 158,102 ~~ 39,974 5 1,,,316,200 3,157,979 22.3,269 94,807 318,076 94,807 6 29,532,500 6,089,175 182,066 182,688 364,754 182,683 7 5,636,778 1,162,222 137,558 137,558 262,494 8 15,525,690 3,201,173 121,324- 408,566 529,890 408,566 9 140,103 28,809 1,092 2,945 4,037 2,945 10 78,144 16,113 611 952 1,563 952 11 29,299 6,041 229 1,040 1,269 1,040 12 28,392 5,854 222 534 756 534 13 73,443 15,lh3 574 1,582 2,156 1;5 82 27 2,894,346 596,773 17,90,3 69,718 87,621 69,718 28 489,645 100,958 32"~ 12,280 12,603 12,280 Issues 14 - 26 same as on Table II RecaEitulation Direct Debt Secured 88;,458,180 18,238,800 1,524,297 1,524,297 ..;.. Unsecured 50,057,072 10,321,046 523;46,3 317,469 840,932 317;,469 Internal & ,state 24,895,840 5:;133,086 '142,278 635,175 '777,453 '760,111 Total Direct Debt 163,411,092 33,692,932 2,190,038 952;644 3,11. 2,682 1,077,580 Railway Dc bt 57,537,008 11,865,192 202,953 737,147 940,100 989,050 Grand Total 220,948,100 45,558,124 2,392,991 1,689,791 4,082,782 t '166,630  DRAFT Table II-a: TOTAL EXCHANGE ADJUSTMENT FAYIILZNTS AND TOTAL R:GDUCTION OF PRINCIPAL UNDER THE ALT~Rl"lATE - Contd. RE:FUNDING PLAN V CONVERTING ISSUES NOS. 1, 2 AND 3 AND 14 THROUGH 26 INTO AN ISSUJ: ViITH A 4ft% COUPON AND ISSUES 4 THROUGH 13 AND 27 .~ND 28 INTO AN IS3UZ ~:ITH A 2;b-s COUPON Pa?:8 2 11 All computations are approximate and are based, in each case, on the average 11fe of the bond from Jan. 1, 1952 ~ For titles of issues see Table III NOTE: The figures set forth in this table have been prepared by the Statistical Section - of the Bank and such figures axe believed to be reliable but the Bank cannot guarantee the accuracy thereof.  ,. Table lIlt TITL~S Off BOND ISSUES ~ Page 1 Issue Title of issue no.- DIRECT DEBT Secured Debt 1 Republic of MeA~eo 5% Cons. Ext. Gold Loan of 1899 2 Repu.blic of Mezi,co4% Ext. Gold Loan of 1910 J Republic of Me:;:ico 6% 10 :year Treasury liotes of 1913 Unsecured Debt 4 City of Mexico 5% Sterling Loan of 1889 .5 !nst. for Irrigation and Agriculture 35 year 4 1/2% due november 1, 1943 6 United States of .eAlce 4% Gold Bonds of 1904 Internal and state TIebt 7 Republic of Mexico Cons... J» Internal Debt of 1885 8 United States ofMe~jco 5% International Red. Bonds of 1895 9 State of Vera Cruz- SJO 13Q.lld~ -duo April 1,. 1927 10 State of Vera Cruz 5~ Bond dated Jan~ry 1, 1907 II State of Tamaulipas 5~~ Bonds dated July 1, 190.3 1.2 Sj;ate of Tamaulipas 5p Bonds dated January 1, 1907 I) S·tate of Sinaloa 5~ Bonds dated January It 1907 27 Tehuante~cNatio'nal-Railway 5CP Gold Loan due June JOt 1953 28 Tehuantepee National Railway 4 1/2% Gold Loan due June JO, 1953 RA.!L\,{AY DEBT - PLAN A 14 N:ational Rys. of Mexico Guar.. Gen. ~ftge. 4% 70-year S.F. Red. Gold Bonds, due October 1, 1977 15 Vera Cruz & Pacific R.R. Co.• 1st r-rtge. 4 1/210 Gold Bonds due July 1, 19.34 16 National Rys. of Me:::ico Prior Lien 4 1/2% 50-year S.F. Red. Gold Bonds due July 1, 1957 17 National H..R. Co. of Mexico Prior Lien 4 1/2% Gold Bonds due October 1, 1926  , ... DRAFT Table III: TITLES OF BOlID ISSUES - Continued _P(lge 2 Issue Title of iesue no._ RAILWAY DEB~- PLAN A - Continued 18 National R.R. Co. of 1,lexico 1st Cons. l~tge. 4% Gold Bonds due October 1, 1951 19 The Mexican International R •.R. Co •. 4 1/2% p'rior Lien Sterling Bonds due September I, 1947 20 The Mexican International R.R. Co. 1st Cons. Mtge. 4% Gold Donds due September 1, 1977 21 Pan American R.R. Co. 1st Mtge. S~ Gold Bonds due January 1, 1934 22 Pan American R.R. Co. Gen. Mtge. 5% Gold Bonds due January 1 ... 1937 2) lvlexican Central By. Co. Ltd. SIS Priol:"i ty Bonds due July 1, 1939 24a Me::ican Central By •. Co. 5% Equip. Notes & tilttS.,- .. 1st Series dated April 1,_ 1897 b 2nd Series dated October 2, 1899 d Series No·. 10 dated January I, 1907 2Sa National Rys. of Mexico 6% Sec. Gold Notes matur1D.g up to January 1, 1917: Series ftBfl dated April 1, 1914 b ,)-months' Secured dated December 1, 191.3 • d .J-year Secured dated January 1, 1914 Series ftC" dated June 1, 1914 26a National Rys. of Mexico 6~ Sec. Notes maturing up to July 1, 1916~ 2-year., due June 1, 1915 b 2-year., due July 1, 1916