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What types of debt securities offerings are typical, and how active is the market?
Typical offerings of debt securities in Mexico include public offerings of registered long-term and short-term debt securities, usually documented through certificados bursátiles (a Mexican security that provides sufficient flexibility to represent debt or equity-type investments). It is also usual for Mexican companies to conduct private placements of debt securities outside of Mexico, usually relying on Rule 144A or Regulation S of the Securities Act of 1933.
Although Mexican debt capital markets have been active, the past year has seen a slowdown owing to the uncertainty created by the NAFTA renegotiation, the tax reform recently enacted in the United States and the Mexican presidential elections coming up on 1 July 2018. While we expect debt issuances to continue in the future, we are of the view that offerings of debt securities will slow down until some of these uncertainties have been resolved.
Describe the general regime for debt securities offerings.
Offerings of debt securities in Mexico are mainly governed by the Mexican Securities Market Law, the related regulations issued by the Mexican Banking and Securities Commission (CNBV) known as General Regulations Applicable to Issuers and other Market Participants, and the regulations issued by the Mexican Securities Exchange. Generally, debt securities may only be offered in the territory of Mexico through a public offering, unless the issuer can rely on a private placement exemption contained in the Securities Market Law.
A public offering in Mexico requires the prior authorisation of the CNBV, the registration of the securities in the National Securities Registry maintained by the CNBV and the favourable opinion of the Mexican Securities Exchange for the listing of such securities therein. Upon registration of the securities in the National Securities Registry, the issuer would become a reporting company in Mexico and would be subject to the reporting requirements contained in the Mexican securities legislation, including disclosing quarterly and annual financial information as well as relevant events. The CNBV and the Mexican Stock Exchange would be in charge of supervising and enforcing compliance of such reporting requirements.
Debt securities may also be offered in Mexico through a private placement to the extent that such securities are not registered in the National Securities Registry and the offer is made exclusively to institutional investors or qualified investors (individuals that have maintained during the past 12 months, on average, investments in securities in an amount equal to or greater than approximately US$483,000, or that have obtained in the past two years a gross annual income equal to or greater than approximately US$161,000).
Mexican law does not have an extraterritorial reach and offerings of debt securities by Mexican issuers outside of Mexico would have to be conducted in accordance with the securities laws of the jurisdiction in which such offerings take place. The Securities Market Law does, however, require such Mexican issuers to report their offerings outside of Mexico to the CNBV and the Mexican tax administration service.
Filing and documentary requirements
General filing requirements
Give details of any filing requirements for public offerings of debt securities. Outline any requirements for debt securities that are not applicable to offerings of other securities.
In order to obtain the authorisation of the CNBV to conduct a public offering of debt securities in Mexico and to obtain the registration of such securities in the National Securities Registry, a filing must be carried out with the CNBV. In addition, another filing has to be done before the Mexican Securities Exchange to obtain its favourable opinion and listing of the securities. Both filings are required to include the following documents:
- an application executed by the issuer, a Mexican broker-dealer acting as underwriter, and the institution acting as common representative of the investors;
- a certified copy of the power of attorney of the issuer’s legal representative;
- a secretary’s certificate ascertaining the validity of such power of attorney;
- a certified copy of the deed of incorporation and current by-laws of the issuer;
- a certified copy of the issuer’s corporate authorisation for the issuance;
- a draft of the global certificate which will document the securities;
- annual audited financial statements for the last three years prepared in accordance with the International Financial Reporting Standards (IFRS) and, to the extent such statements are more than six months old, limited review interim financial information, in the understanding, that the issuer may also have to provide internal unaudited quarterly information if the limited review interim financial information is more than three months old. Short-term issuances (commercial paper with less than one year maturity) would only require one year of annual audited financial statements;
- an independence letter from the issuer’s external auditor;
- a legal opinion from the issuer’s external legal adviser;
- a draft of the underwriting agreement;
- a draft of a public offering notice;
- a draft of a preliminary prospectus (or supplement, in the case the issuance is being made under a programme of registered securities), in the understanding that a prospectus is not required for short-term issuances;
- at least one credit rating (although the standard market is to provide two credit ratings); and
- evidence of payment of application fees.
All in all, the requirements to conduct a public offering of debt securities in Mexico are similar to the requirements that would apply to equity securities, except that equity issuances do not require credit ratings.
In a public offering of debt securities, must the issuer produce a prospectus or similar documentation? What information must it contain?
Generally, a public offering of debt securities requires that the issuer produce a prospectus containing all relevant information for the public to make an informed investment decision when purchasing the securities, except that issuances of short-term debt securities are exempt from this requirement. When a prospectus is required, it will have to include at least the following information:
- a summary of the issuer and its business;
- risk factors;
- a description of the offering, including the credit ratings of the issuer;
- the use of proceeds of the offering;
- the plan of distribution of the securities;
- detailed information of the issuer; and
- management’s discussion and analysis of the issuer’s financial statements.
Describe the drafting process for the offering document.
The drafting of an offering prospectus is commonly a joint effort between the issuer, the underwriters and the issuer’s external legal counsel. The key issue in preparing any prospectus is finding the correct combination that will allow compliance with the legal requirement to disclose any and all information that is relevant for an investor to make an informed decision when purchasing the securities, and crafting an attractive selling document that will ultimately be used to sell the notes. This is particularly challenging with new issuers that are first coming to market, where careful due diligence by the underwriters and legal counsel will have to be conducted to ensure a fair, accurate and complete disclosure. For recurring issuers, the process of drafting the prospectus is much more streamlined, considering that Mexican securities regulations allow certain cross-references to other public filings to be included in the offering document.
The Securities Market Law and its regulations contain no clear, bright-line rule to determine the information that will be considered relevant for an investor to make an informed investment decision. The determination of what constitutes relevant information is subjective and will have to be made by the issuer together with the underwriters on a case-by-case basis. However, certain rules applicable to ‘relevant events’ that will have to be disclosed by an issuer once its securities have been registered can provide some guidance as to which information the regulator considers to be ‘relevant’. For example, Mexican securities regulations contain a list of certain events that would be considered as relevant, such as changes to the corporate structure of the issuer. In addition, a threshold has also been included, which considers any act, circumstance or event to be deemed relevant when it represents more than 5 per cent of the total assets, liabilities or consolidated corporate capital of the issuer, or more than 3 per cent of the consolidated total sales of the issuer, in each case, for the immediately preceding fiscal year. It is important to note that an event can be deemed relevant even if it represents an amount that is below such thresholds if it is important enough to influence an investor’s decision to purchase the securities.
Finally, we note that the offering documents to be used for private placements are not subject to regulation in Mexico, although issuers in the past have used simplified private placement memorandums containing the most relevant information of the particular investment.
Which key documents govern the terms and conditions of the debt securities? Who are the parties to such documents? How can such documents be accessed?
The key documents that govern the terms and conditions of registered debt securities include a global certificate, which is the legal document that contains the terms of the note (including amount, interest rate, maturity date and covenants), a prospectus and a prospectus supplement (in case the issuance is being made under a programme of registered securities).
The global certificate has to be signed by an authorised representative of the issuer and the common representative of the bondholders.
The prospectus and prospectus supplement, which are not legal contracts but are the offering document for the issuance, contain 10b-5 type representations related to the accuracy, completeness and fairness of the information contained therein, which must be signed by the CEO, CFO and CLO of the issuer, an authorised representative of the underwriter, the issuer’s external auditor, the issuer’s external legal counsel and the common representative of the noteholders, among others.
The prospectus, once public, can be accessed through the electronic portals of the CNBV (STIV) and the Mexican Securities Exchange (Emisnet). The global certificate is usually included as an exhibit of the prospectus and is also generally available online.
Does offering documentation require approval before publication? In what forms should it be available?
Under the Mexican securities regulation, the issuer and the underwriters in a public offering of debt securities cannot conduct marketing efforts with respect to the securities unless a preliminary prospectus has been filed and uploaded to the electronic portals of the CNBV (STIV) and the Mexican Securities Exchange (Emisnet), and has been made publicly available. Before the prospectus is made publicly available, no marketing efforts can be conducted and any communications with potential investors must be limited to non-deal information.
Are public offerings of debt securities subject to review and authorisation? What is the time frame for approval? What are the restrictions imposed, if any, on the issuer and the underwriters during the review process?
In order to conduct a public offering of debt securities, an issuer is required to obtain the authorisation of the CNBV to register the securities in the National Securities Registry and to conduct a public offering thereof, as well as the favourable opinion of the Mexican Securities Exchange to list the securities therein.
The time frame for approval varies from deal to deal, depending on several factors including complexity of the deal, completeness of the filing documents and work load of the regulators. However, the authorisation process in general has become quite streamlined, and assuming all documents are complete and comply with all legal requirements, can be completed for first-time issuers in as little as two months from the date of the initial filing.
During the review process and as mentioned above, until the filing has been made publicly available in the electronic portals of the CNBV and the Mexican Securities Exchange, no marketing efforts can be conducted by the issuer or the underwriters. In addition, unless and until the CNBV has registered the securities in the National Securities Registry and has authorised the public offering, neither the issuer nor the underwriters may carry out the actual offering and pricing of the securities.
On what grounds may the regulators refuse to approve a public offering of securities?
The CNBV may refuse to approve a public offering of securities if the filing documents fail to comply with the requirements set forth in the Securities Market Law and its related regulations, particularly with respect to disclosure. In addition, if the issuer is already a reporting company, the CNBV may also refuse to approve an offering if the issuer is not compliant with its ongoing reporting obligations.
How do the rules differ for public and private offerings of debt securities? What types of exemptions from registration are available?
Generally, debt securities may only be offered in the territory of Mexico through a public offering, unless the issuer can rely on a private placement exemption contained in the Securities Market Law. As described in question 2, a public offering of debt securities in Mexico typically requires the prior authorisation of the CNBV, the registration of the securities in the National Securities Registry maintained by the CNBV and the favourable opinion of the Mexican Securities Exchange for the listing of such securities therein.
Debt securities may also be offered in Mexico through a private placement to the extent that such securities are not registered in the National Securities Registry and the offer is made exclusively to institutional investors or qualified investors. Although the offering documents to be used for private placements are not subject to regulation in Mexico, issuers in the past have used private placement memorandums containing the most relevant information applicable to the related investment. Issuers also obtain ‘big boy’ letters from potential investors to ascertain that the offering is indeed being made to institutional or qualified investors only.
Describe the public offering process for debt securities. How does the private offering process differ?
The process for conducting a public offering of debt securities generally involves a timeline comprising four different segments, as follows.
Process prior to first filing
Prior to the first filing of a public offering, the issuer needs to appoint all parties involved in the process, including one or more underwriters, the external legal advisor, the institution that will act as common representative of the bondholders, the issuer’s external auditor and the rating agencies. Once appointed, the issuer will commence the elaboration of the prospectus and the other issuance documents, as well as the financial information that will have to be presented as part of the filing.
First filing and CNBV review
Once the first filing documents are complete, the issuer will make the first filing before the CNBV and the Mexican Securities Exchange to commence their review process. Although not required, it is customary that the first filing is done on a confidential basis so as to give the CNBV and the Mexican Securities Exchange time to review the filing documents and provide comments before the documents are publicly available. This means, however, that no marketing efforts can be conducted until the filing is made public. Therefore, there may be instances where it may make sense to make the first filing public if marketing needs to commence on an expected basis.
Public filing and road show
Once the issuer and the underwriters are comfortable that the documents will not undergo further material changes (either as a consequence of the review process by the CNBV and the Mexican Securities Exchange or otherwise), the issuer will request the CNBV and the Mexican Securities Exchange to lift the confidentiality of the filing and the filing documents (including the prospectus). Upon lifting of the confidentiality of the filing, the issuer and the underwriters may commence the marketing of the securities, including conducting the respective road show. The issuer and the underwriters may use an investor presentation as a selling instrument for the road show, but only to the extent that the presentation contains information that is also included in the prospectus. Pursuant to the Securities Market Law, the prospectus is required to be the selling document during the road show. If a relevant event occurs during the road show and prior to pricing, the prospectus (and the investor presentation) must be updated to reflect such relevant event. Note that the preliminary prospectus containing all material information must be made available to the public at least five business days prior to the intended pricing date (or two business days for short-term bonds).
Pricing and settlement
On the day immediately preceding the pricing date, the issuer must publish a public offer notice in the electronic portal of Emisnet. On the pricing date, the issuer and the underwriters will carry out the public offering of the securities (whether through a public auction or a book building method), and determine the pricing thereof. Once the pricing has been determined, the definitive prospectus (including final numbers) would be published in the electronic portals of the Mexican Securities Exchange and the CNBV. Clearing and settlement of the transaction would typically occur one business day after the pricing date (although this time can be extended by prior written notice to the Mexican Securities Exchange).
The time frame for concluding a public offering of securities varies from deal to deal, depending on several factors including complexity of the deal, availability of financial statements and credit ratings, and the authorisation process with the CNBV and the Mexican Securities Exchange. Assuming all documents are available and complete, that the financial statements are current and in accordance with IFRS, and that the filing complies with all legal requirements, a public offering of the securities can be completed for first-time issuers in two to five months from the date of initiation of the transaction.
The process for a private offering is completely different in Mexico since it is not a regulated process. Generally, a private placement may involve the preparation of a selling document containing all relevant information of the respective investment, as well as obtaining ‘big boy’ letters from potential investors. However, neither of these items is strictly required, and therefore the timing and documents involved in a private placement of securities may vary depending on the issuer, the potential investors and the other parties involved in the structuring and execution of the private placement.
What are the usual closing documents that the underwriters or the initial purchasers require in public and private offerings of debt securities from the issuer or third parties?
In a public offering in Mexico, the underwriters will enter into an underwriting agreement with the issuer that will establish the terms of the underwriting, including indemnities and closing conditions. Those closing conditions typically require that the issuer deliver to the underwriters the statutory legal opinion (which refers to legality and validity), the rating letters issued by the related rating agency, and other standard conditions. We note that in a public offering in Mexico it is not common for the underwriters to request auditors’ comfort letters or 10b-5 type opinions since the CEO, CFO and CLO of the issuer, the external auditor and the external legal counsel sign the prospectus and assume responsibility for the information contained therein (insofar as it relates to their participation in the deal). However, we note that derived from cross-border issuances of debt securities by Mexican companies (in which underwriters or initial purchasers typically do require auditors’ comfort letters and 10b-5 opinions), some underwriters have begun requesting such documents in the domestic market as well.
With respect to private offerings of debt securities, it would be customary for the intermediaries involved to request a legal opinion regarding legality, validity and enforceability of the transaction documents, as well as ‘big boy’ letters from prospective investors. If a private placement memorandum is used in the offering and sale of the securities, it would also be usual for intermediaries to receive a 10b-5 type statement from the issuer or its counsel with respect to the information contained therein, as well as a comfort letter from an independent auditor if numbers are being shown to prospective investors.
What are the typical fees for listing debt securities on the principal exchanges?
There are four types of fees for the listing of debt securities in the Mexican securities exchange:
- an application fee of the CNBV in an amount of approximately US$1,200;
- an application fee of the Mexican Securities Exchange in an amount of approximately US$1,200;
- a registration fee in an amount equal to the issued amount times 0.0007, without exceeding an amount of approximately US$191,000; and
- a Mexican Securities Exchange listing fee ranging from US$660 to US$3,800, depending on the amount issued.
Special debt instruments
How active is the market for special debt instruments, such as equity-linked notes, exchangeable or convertible debt, or other derivative products?
Although the market for special debt instruments is relatively new in Mexico, there has been some proliferation in recent years in over-the-counter markets, particularly with respect to cross-border derivatives transactions. On the other hand, the Mexican derivatives exchange (MexDer) only offers futures and options over certain commodities.
What rules apply to the offering of such special debt securities? Are there any accounting implications that the issuer should be aware of?
Unless the counterparty is a regulated entity (such as a Mexican banking institution), there are no specific regulations that apply to over-the-counter special debt securities, and the terms thereof can be contractually agreed by the parties. These types of transactions may have different accounting implications depending on the way in which such special debt securities are structured, and therefore an analysis of the tax and accounting consequences for the parties would have to be conducted on a case-by-case basis.
What determines whether securities are classed as debt or equity? What are the implications for instruments categorised as equity and not debt?
Based on a Mexican securities law perspective, equity securities are securities representing the capital of a legal entity, while debt securities represent a participation in a loan or a collective credit.
Equity securities grant investors an ownership share in the business, and therefore, they generally provide voting rights and the possibility of obtaining gains derived from the issuer’s future profits; whereas, debt securities grant investors the right to obtain a repayment of capital with interest thereon. As such, market practice identifies debt securities as those that bear interest, have a predictable payment schedule and a credit rating.
Whether a security qualifies as debt or equity can have several different implications. From a tax perspective, tax liabilities (including withholding tax payments) will be different between taxes on interest payments and taxes on equity or equity-like distributions. In addition, the investment regimes of institutional investors may allow for different exposures to debt securities or other equity-like instruments.
Transfer of private debt securities
Are there any transfer restrictions or other limitations imposed on privately offered debt securities? What are the typical contractual arrangements or regulatory safe harbours that allow the investors to transfer privately offered debt securities?
Debt securities may be offered privately to qualified or institutional investors pursuant to the registration exemptions provided for in the Securities Market Law. Notwithstanding the private offering safe-harbour, after the initial issuance there are no restrictions for the transfer of such securities to other persons, except that if such transfer is conducted by means of an offering, then a public offering would have to be carried out unless the seller relies on a private placement exemption.
Are there special rules applicable to offering of debt securities by foreign issuers in your jurisdiction? Are there special rules for domestic issuers offering debt securities only outside your jurisdiction?
Non-Mexican issuers may access Mexican debt capital markets either through: offering and registering the corresponding debt securities in the National Securities Registry and listing such registered securities in the Mexican Securities Exchange; or listing such securities in the International Quotation System operated by the Mexican Securities Exchange.
If a non-Mexican issuer opts for registering the debt securities in the National Securities Registry, it would have to follow a similar offering process to that applicable to Mexican issuers. Additionally, upon registration the non-Mexican issuer would be subject to ongoing reporting obligations that closely resemble those applicable to domestic issuers, with the exception that the issuer may file in Mexico the information it discloses in its market of origin. Furthermore, the information required to be disclosed may be provided initially in English, to the extent a Spanish translation is provided shortly thereafter.
On the other hand, a non-Mexican issuer may access debt capital markets in Mexico by listing the securities issued abroad within the International Quotation System provided certain requirements are met (including that such securities are issued in a market in which the regulator is on the International Organization of Securities Commissions board or has otherwise obtained recognition from the Mexican securities regulator). Securities listed in the International Quotation System are exempt from registration in the National Securities Registry, and as such the corresponding non-Mexican issuer will not be required to file a registration request with the CNBV, nor will it be subject to the ongoing reporting obligations as an issuer of registered securities in Mexico. Once listed in the International Quotation System, the non-Mexican issuer’s obligations would be limited to providing reports with the same periodicity and content as those provided in its home market.
Are there any arrangements with other jurisdictions to help foreign issuers access debt capital markets in your jurisdiction?
Mexico is a party of the Latin American Integrated Market (MILA), which is a common securities trading market that integrates the stock exchange markets of Chile, Mexico, Colombia and Peru. Such integration seeks to provide investors a greater variety of investment opportunities.
Although as of January 2018 MILA is still limited to equity securities, the trading of debt securities is provided for in MILA’s strategic plans and is expected to be implemented in the near future.
What is the typical underwriting arrangement for public offerings of debt securities? How do the arrangements for private offerings of debt securities differ?
There are two types of underwriting arrangements for public offerings of debt securities: best efforts and firm commitment. It is worth noting that most public offerings of debt securities in Mexico are carried out under a best efforts arrangement.
We note that Mexican broker-dealers are restricted from carrying out intermediation activities with respect to unregistered debt securities, and such securities must in any case be offered directly by the issuers.
How are underwriters regulated? Is approval required with respect to underwriting arrangements?
Underwriters in Mexico must be licensed broker-dealers, duly authorised by the Mexican Ministry of Finance, and are subject to several provisions and guidelines contained in the Securities Market Law and its related regulations. The underwriting agreements entered into by Mexican broker-dealers must in all instances comply with the Securities Market Law and such regulations.
What are the key transaction execution issues in a public debt offering? How is the transaction settled?
Generally, a public offering of debt securities in Mexico is cleared and settled one business day after the pricing date of the transaction. For such purposes, the issuer is required to deposit the global certificate representing such securities in SD Indeval Institución para el Depósito de Valores, SA de CV (Indeval), the central depository institution of the Mexican Securities Exchange. On the settlement date, the securities would be credited in book-entry form to the accounts of the lead underwriters in Indeval, and such lead underwriters would in turn credit such securities to their respective clients. Such underwriters would use the amounts deposited in their client accounts to deliver to the issuer, through Indeval, the proceeds of the public offering.
How are public debt securities typically held and traded after an offering?
Public debt securities are typically held in book-entry form in the accounts that Mexican broker-dealers hold with the Mexican securities depository, Indeval, and are listed in the Mexican Securities Exchange.
Outstanding debt securities
Describe how issuers manage their outstanding debt securities.
In order to manage their outstanding debt securities, issuers can repurchase such securities in the secondary market and carry out consent solicitations in order to amend the term and conditions of their respective debt securities (in the understanding that such amendments typically require certain consents from the respective bondholders’ meetings).
Regulation and liability
Are there any reporting obligations that are imposed after offering of debt securities? What information would be included in such reporting?
The ongoing reporting obligations of an issuer can be divided into three broad categories:
- annual reports: no later than 30 April of each year, the issuer must file an annual report which, among other things, discusses the issuer’s financial statements for the preceding fiscal year;
- quarterly information: on a quarterly basis, the issuer will have to file a report containing quarterly unaudited financial information for the corresponding quarter, with a comparison against the same quarter of the preceding fiscal year; and
- relevant events: the issuer will also have to disclose to the public the occurrence of any act, event or circumstance that has or may have an impact on the price of the securities of the respective issuer.
Describe the liability regime related to debt securities offerings. What transaction participants, in addition to the issuer, are subject to liability? Is the liability analysis different for debt securities compared with securities of other types?
Mexican securities regulation contemplates liability for the CEO, CFO and CLO of the issuer, the common representative, the underwriter, the issuer’s external legal counsel and the external auditor. Although all the aforementioned parties sign the prospectus, the extent to which they are liable for the information contained varies in each case. For example, the CEO, CFO and CLO of the issuer are required to personally state, under oath, that they have reviewed and prepared all the information contained in the prospectus, and that such information is correct, accurate and complete in all material respects. The underwriters are liable for ascertaining that the prospectus complies with all regulations applicable to it, including with respect to disclosure.
The penalties for including inaccurate, misleading or incomplete information in a prospectus could range from civil liability (which includes the payments of damages and lost profits), to administrative sanctions and in some cases criminal liability.
What types of remedies are available to the investors in debt securities?
Under Mexican law, investors in debt securities are allowed to exercise actions for liability against the issuer through the common representative, which is a Mexican financial institution that represents the collective interests of the investors. Additionally, investors may, through a summary trial, demand payment of any owed and unpaid coupons. More generally, under Mexican law, individuals or entities may sue for damages and lost profits.
What sanctioning powers do the regulators have and on what grounds? What are the typical results of regulatory inquiry or investigation?
The CNBV has broad supervisory authority, which in general terms allows it to issue comments, and if applicable, order an issuer to adopt measures to correct acts or omissions in connection with its obligations. In addition to its supervisory authority, the CNBV may also impose fines and administrative sanctions, and in certain cases investigate conduct that is considered to constitute a criminal offence.
What are the main tax issues for issuers and bondholders?
The main tax issues for issuers and bondholders consist of the payment of income tax (directly or through withholding) and the payment of taxes upon transfers of certificates. Payments of interest made by Mexican issuers in respect of bonds to a non-Mexican holder will generally be subject to a Mexican withholding tax assessed at a rate of 4.9 per cent, if the following requirements are met:
- the bonds are placed outside Mexico through banks or broker-dealers, in a country with which Mexico has a treaty for the avoidance of double taxation in effect;
- a notice of the offering is filed before the CNBV describing the main characteristics of the bonds; and
- the issuer complies with the information requirements specified from time to time by the Mexican tax administration service.
If any of such requirements is not met, the withholding tax applicable to interest payments under bonds made to non-residents of Mexico may be imposed at a rate of 10 per cent or higher.
Under the Mexican Income Tax Law, payments of principal made by the issuer in respect of the bonds to a foreign holder will not be subject to Mexican withholding tax.
Gains resulting from the sale or disposition of bonds by a foreign holder to another foreign holder are not subject to income or other tax in Mexico. Gains resulting from the sale of bonds by a foreign holder to a purchaser who is a Mexican resident for tax purposes or to a foreign holder deemed to have a permanent establishment in Mexico for tax purposes, will be subject to Mexican federal income or other taxes pursuant to the rules described above in respect of interest payments, unless an applicable income tax treaty provides otherwise. The acquisition of bonds at a discount by a foreign holder will be deemed interest income, and subject to Mexican withholding taxes, if the seller is a Mexican resident or a foreign resident deemed to have a permanent establishment in Mexico.