Announcement of IFC to Support $1.7 Billion Corporate Debt Reduction Program in Mexico October 25, 1988

October 25, 1988 Monique Amaudry Press release no. 89/17 (202) 473.93.31 IFC SUPPORTS $1.7 BILLION CORPORATE DEBT REDUCTION PROGRAM IN MEXICO The International Finance Corporation (1FC) is providing an $80 million loan and taking an equity participation to support the $1.7 billion debt restructuring program of the Visa Group, one of Mexico's largest industrial conglomerates. The program will reduce the Group's corporate debt by about $1.3 billion to approximately $400 million through debt buy-outs, debt-for-debt swaps (including exchange of sovereign debt), debt-to- equity swaps, and asset divestitures. The restructuring program will also reduce Mexico's outstanding foreign debt by up to $1.1 billion. As of today, Visa has received the support of the creditor group and the closing of the transaction is expected to be formalized soon. Funding for the cash buy-out portion of the restructuring program includes such financing sources as new long-term debt of $170 million (including $80 million from IFC), approximately $230 million from operations and divestitures, and over $60 million in new cash equity subscriptions including a public share issue and direct foreign investment. The remaining portion of the Group's debt will be exchanged for approximately $230 million of restructured senior and soft notes and $100 million in common shares. IFC, a World Bank affiliate, is the largest source of direct project financing for private enterprises in developing countries. In this case, IFC's investment and involvement in the structuring of the -2- debt reduction program were instrumental in helping to mobilize the resources required to carry out the restructuring. The program involves the operational and financial restructuring of three companies, Valores Industriales, S.A. de C.V. (Visa Holding), its largest operating subsidiary, Fomento Economico Mexicano, S.A. de C.V. (Femsa), and Grupo Cermoc, S.A. de C.V. (Cermoc), and the consolidation of Femsa and Cermoc into a single company. Visa is an integrated consumer group headquartered in Monterrey (Mexico), whose main activities are in beverages, packaging, distribution, and food processing. The Group employs more than 40,000 workers. Visa's debt restructuring program will enable it to grow and invest and to resume a leadership role in the industrial development of the Mexican private sector, enhancing its access to capital markets. The Company is also expected to expand export operations particularly in light of the ever growing acceptance of Mexican beer by U.S. consumers. The restructuring program is the result of cooperative efforts between the creditors (through the Creditors' Steering Committee and its working group under the Chairmanship of Bank of America), the Government of Mexico; the new creditors and investors, including Nacional Financiera S.N.C. (Nafinsa), the Mexican Development Bank, Citicorp Investment Bank, and Valores Finamex S.A.; and the existing shareholders, under the leadership of Visa's management and IFC. IFC played a central role in the restructuring of the Visa Group. It conducted an in-depth operational and financial review of the Group which served as the basis for the restructuring program and actively participated in the structuring of the program's debt reduction -3- options. Visa's restructuring is expected to become a model for companies seeking a fundamental restructuring of their operational and financial conditions. IFC's involvement in Visa's corporate restructuring is part of the Corporation's efforts to channel funds and address the pressing problem of corporate overindebtedness affecting many companies in the Mexican private sector. IFC's program helps revitalize operationally viable companies by reducing their debt levels and strengthening their efficiency and profitability through operational improvements. These objectives are achieved through the use of creative market-driven financial engineering mechanisms. IFC has been playing a pioneering role in assisting the restructuring of private sector companies in Mexico, including Apasco S.A. de C.V., a leading cement producer; Salumi S.A. de C.V., Mexico's largest processed meat company; and now the Visa Group. IFC is also providing a line of credit to Banca Serfin, a leading Mexican commercial bank. This new credit line will be used for similar restructuring operations but in small and medium-size Mexican companies.