MEXICO Law and Practice Contributed by: Alejandro Stamoglou, Jesús Pérez Alcántar and Julio Jiménez Manrique, Bello, Gallardo, Bonequi y García, S.C.
3.6 Recent Legal and Commercial Developments
uncertainties about the local currency and its future behaviour. 3.3 Restrictions on Foreign Direct Lenders Foreign lenders are not restricted from providing pri - vate credit or taking security in Mexico. However, when foreign lenders engage in private credit on a regular and professional basis, they must comply with increasingly stringent anti-money laundering regula - tions, which impose obligations related to reporting, client identification and registration of such transac - tions. Regarding security interests, while there is no prohibi - tion for foreign lenders to take collateral, it is impor - tant to note that certain types of security may require registration with public registries. 3.4 Use of Proceeds and Acquisition Financings In general, as in international practice, credit agree - ments in Mexico typically include provisions regard - ing the permitted use of proceeds, which borrowers must strictly observe. To ensure compliance, lenders often establish monitoring rights, such as the ability to inspect accounting records or visit the borrower’s premises to verify that the funds are being applied for the agreed purposes. Regarding local practical challenges for private cred - it providers in take-private transactions and other acquisition financings, these may include obtaining authorisation from competition and securities regu - latory authorities, as well as complexities related to collateral arrangements when multiple jurisdictions are involved, and the registration process with the relevant public registries. 3.5 Debt Buyback While debt buybacks are not prohibited under Mexi - can law, they are not a common practice in private credit transactions. In line with international practice, Mexican loan documentation generally allows borrow - ers to voluntarily prepay their debt, which in effect achieves similar economic results to a buyback.
In 2025, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued orders identifying three Mexico-based financial institutions as being of primary money laundering concern. As a result, during the past semester, Mexican financial institutions have significantly strengthened measures to identify, track and monitor financial transactions. This development is particularly relevant because trusts, as noted in 3.1 Common Structures , are com - monly used by private credit providers to implement their structures. The authors anticipate these events will continue to influence and shape legal documen - tation going forward. Consequently, documentation now includes enhanced AML provisions, stricter KYC requirements and contractual obligations for ongoing monitoring and reporting. In addition, following global trends, ESG factors have been incorporated into legal documentation. Credit providers now include specific covenants requir - ing borrowers to meet sustainability-related obliga - tions. This trend reflects the growing demand from institutional investors in the private credit industry for In Mexico, junior or hybrid capital is commonly provid - ed in the form of subordinated debt and is designed to offer flexible financing solutions where borrowers seek additional leverage without immediate equity dilution. Typically, this debt is used as bridge financing, and once the principal debt facility closes, its proceeds are applied to fully repay the subordinated debt. In other cases, the documentation for the principal debt expressly acknowledges the existence of the subor - dinated facility and incorporates it into the payment waterfall. Documentation for this type of capital is highly bespoke and tailored to the borrower’s specific needs. It often includes intercreditor provisions and contem - plates different forms of security, such as pledges over shares and assignments of receivables. responsible investment practices. 3.7 Junior and Hybrid Capital
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