denotes premium content | Jan 6 2009 
Feature
posted 23 Feb 2005 in Volume 8 Issue 4
Pemex pidiregas projects, Mexico: A multi-sourced masterpiece
MLA & underwriter: HSBC London
Borrower: Pemex Project Funding Master Trust (ultimate parent: Pemex)
Deal size: $300m
ECAs: Atradius, Coface, Giek, Sace
Sponsors/contractors/lessees include: Halliburton, Schlumberger, Nuovo Pignone and Petroleum Geophysical
Guarantor: Pemex (Petroleos Mexicanos)
Tenor & payment schedule: pre-credit period plus 8.5 years repayment
This multi-sourced framework agreement (the ‘MSLOC’) provides an innovative solution to Pemex’s requirement for a single, efficient finance vehicle to channel ECA credits covering a variety of European sources. This was the first-ever multi-sourcing facility of its kind in Mexico, being initially approved by the Mexican ministry of finance on 2 October 2002. The MSLOC framework documentation was signed on 14 May 2003, but its utilisation did not begin until 2004, hence the 2004 Deal of the Year title.
While there have been other multi-sourcing ECA facilities arranged for the Mexican oil company, the MSLOC differentiates itself through its streamlined documentation which allows the rapid closure of individual facilities, with minimal additional documentation required for each contract to be financed. This affords Pemex near-immediate access to a facility as soon as ECA cover is arranged, without the need for additional approvals either internally or from the ministry of finance.
“This, in my view, is a unique arrangement, both in terms of concept and effective execution,” says Sam Lippitt, manager, project and export finance at HSBC in London. The concept was originated by Pemex in recognition of its need to efficiently maximise the use of officially supported export credits generally, beyond Pemex’s more established US Ex-Im route.
“Once the mandate was agreed, it required a combined effort on the part of Pemex and HSBC to identify eligible business, bring the exporters on-side and simultaneously agree with the ECAs a suitable arrangement to accommodate the unusual features of Mexico’s Pidiregas rules within the overall OECD consensus,” says Lippitt.
“Despite a number of setbacks during the process, this has been achieved through excellent contract monitoring and management on the part of Pemex, exporter marketing and relationship development on the part of HSBC and a joint Pemex/European ECA/HSBC conference in London in early 2004 to enable all parties to discuss and address their respective issues.”
The borrower is a Delaware trust for which Pemex is sole beneficiary, the managing trustee being the Bank of New York. The trust has no credit-worth in its own right but its obligations under the MSLOC bear the unconditional guarantee of Pemex. The borrower enters into an individual facility letter with respect to each contract to be financed, which is then countersigned by Pemex.
Once a facility letter is effective, 85% of amounts paid under the related contract are reimbursed to the borrower. The Pemex guarantee for amounts payable by the borrower is underwritten by the relevant ECA.
“All European ECAs approached with specific transactions have been extremely responsive to the particular requirements of Pemex’s Pidiregas finance arrangements. This demonstrates recognition of the important opportunity, which its multi-billion-dollar annual capital expenditure programme represents to their domestic manufacturers and service providers,” says Lippitt.
“It was a genuine team effort to get the facility beyond the conceptual stage, and this continues to be the case as the programme is further developed. In this respect, all parties, including the exporters, deserve credit.”
