Mexico in $12 Billion Offering

Cleary Gottlieb represented the United Mexican States (Mexico) in an offering of $12 billion of pre-capitalized securities redeemable August 17, 2030 (P-Caps) issued by a Luxembourg special purpose vehicle (EFL I) as part of a series of measures to provide support to Petróleos Mexicanos (PEMEX) in the management and improvement of its balance sheet.

The offering represents the first-ever P-Caps transaction involving a sovereign. BofA Securities Inc., Citigroup Global Markets Inc., and J.P. Morgan Securities LLC acted as initial purchasers. P-Caps are a type of security that provides off balance sheet financing.

The offering priced on July 28, 2025, and is expected to settle on August 14, 2025. The P-Caps, which will be mandatorily redeemable by EFL I for cash on August 17, 2030, were offered under Rule 144A and Regulation S under the Securities Act, and Section 3(c)(7) of the Investment Company Act.

EFL I will invest the proceeds of the sale of the P-Caps to purchase eligible assets in the form of U.S. Treasuries and/or principal and interest strips of U.S. Treasury Securities and enter into a facility agreement with Mexico pursuant to which the eligible assets will be delivered to PEMEX under an uncollateralized global master securities lending agreement (GMSLA). Under the facility agreement, Mexico must either transfer all principal and interest payments on the eligible assets to EFL I or return the eligible assets to EFL I. Mexico will also have the obligation to issue and sell to EFL I an aggregate principal amount of its 5.5% notes due 2030, in an amount equivalent to the aggregate face value of the outstanding P-Caps, upon the occurrence of certain events, including as a result of failure by Mexico or PEMEX to pay the facility fee due under the facility agreement, failure by Mexico or PEMEX to return any eligible assets to EFL I, a general moratorium in respect of any public external indebtedness of Mexico, or an event of default under Mexico’s notes. Following the issuance of the notes upon the occurrence of such events, EFL I will liquidate its assets and distribute the notes to the holders of the P-Caps.

Upon the closing of the P-Caps offering, Mexico will direct EFL I to deliver the eligible assets to PEMEX under the GMSLA, after which title to the eligible assets will pass to PEMEX. PEMEX will then enter into repurchase transactions with affiliates of the initial purchasers, pursuant to which PEMEX will transfer the eligible assets to such affiliates in return for U.S. dollars. PEMEX is expected to use the proceeds received under the repurchase agreement transactions to improve its financial position.

The P-Caps issued by EFL I will not be consolidated with the liabilities of PEMEX or Mexico. The notes, when and if issued by Mexico pursuant to the facility agreement, will constitute public debt of the Mexican government, according to the relevant regulatory provisions of the Mexican government.

Cleary has previously represented Mexico, as issuer, in numerous securities transactions for more than 30 years.