Law on the Promotion of Development and Public Debt Restructuring

Authorization is granted for the establishment of a comprehensive securitization program of potential financial flows from idle State assets, so that they may be used for the payment or readjustment of public debt over a longer term and under better financial conditions than the current ones, and for the provision of seed capital that makes financially viable the project or projects for the rational exploitation of resources or infrastructure referred to in this Decree. The foregoing is without prejudice to expenditure rationalization measures and other measures that must be taken.

For the implementation of the program previously described, the State Department in charge of Finance is authorized to structure a trust in the Central Bank of Honduras, which shall act as custodian of the assets subject to this program, whose assets may be constituted by projects for the rational exploitation of natural resources and infrastructure related in the present Law and which have not been concessions or subject to Public-Private Alliance in accordance with the respective Law. There must be included as part of said assets all pre-investment already performed or executed, studies, analyses, projections, estimates, plans, designs and other pertinent documentation, related to the exploitation or operation thereof, as well as the cash flows projected by their exploitation or operation.

Each State Department, institution or decentralized or deconcentrated entity is instructed to prepare, within a period not to exceed thirty (30) calendar days, an inventory of structured or potential projects for the rational exploitation of natural resources or infrastructure under its responsibility, management or administration, which are idle, capable of generating income in the event of their exploration, exploitation or development and operation. Said inventory must be provided to the State Department in charge of Finance, without prejudice to reporting monthly to the same regarding new projects identified to be subject to what is stated in these legal provisions. Once the inventory is prepared, the State Departments, institutions or decentralized or deconcentrated entities must make the assignment to the Trustee of the rights of the projects selected by the State Department in charge of Finance. The heads of the State Departments and other state entities that fail to comply with what is established in this Article shall be responsible civilly, administratively, and criminally.

The trust must be composed of the following parties:

• 1)

  The trustee;

• 2)

  The State Department in charge of Finance that acts as settlor and as beneficiary; and,

• 3)

  The State Departments, institutions or decentralized or deconcentrated entities, as settlors and beneficiaries.

The trust must be composed of a Technical Committee formed by the following institutions:

• 1)

  The State Secretary in charge of Finance, who shall preside over it;

• 2)

  A Representative of the Commission for the Promotion of Public-Private Alliance (COALIANZA);

• 3)

  The State Secretary in charge of Natural Resources and Environment (SERNA); and,

• 4)

  One (1) representative of the Honduran Association of Banking Institutions (AHIBA). The trustee acts as Secretary of this Technical Committee with voice but without vote.

To ensure the operability of the program, the Technical Committee of the Trust may establish one or more subcommittees, so that they take charge of the selection of the operators responsible for the exploitation of resources or the development of projects. The Technical Committee, following the recommendations of the Subcommittees, shall recommend to the trustee the hiring of one or more sub-trustees that must take charge of the respective hiring for each case and of carrying out the issuances and placement of the investment titles corresponding to each project. The investors who purchase said bonds shall become part of these Sub-Trusts as settlors and beneficiaries. The Technical Committee shall recommend the selection and hiring of the consultants who shall take charge of both the financial and legal structuring of the securitization process of each project.

For the purposes of this Program, the provisions of Article 36 of the Law for the Promotion of Public-Private Alliance, contained in Legislative Decree No. 143-2010 dated August 11, 2010, are applicable, as well as what is regulated in Article 49 of the Law for the Promotion and Protection of Investments which refers to Legislative Decree No. 51-2011 dated May 3, 2011.

Once the securitization process structuring is prepared, the trustee is authorized to instruct the sub-trustees to issue titles against each resource or project, either in national or foreign currency, long-term and at the rates that the State Department in charge of Finance deems favorable, which shall be placed in the national or international market, through private or public offering and may be acquired by both national and foreign investors of a private or public nature, giving preference, but without limitation, to development banks or international entities dedicated to such activities. The trustee shall ensure that there is proper correspondence between the rates and terms of the titles to be issued with the projected cash flow, seeking adequate harmony to avoid a mismatch between income and expenses. In the financial structuring of the different projects, schemes for resource capture that are inclusive of multisectoral participation and diversity of partners must be promoted, giving preference in equal economic offers to those that result in the greatest socioeconomic benefit for Hondurans and optimal use of national internal savings.

The future financial flows projected by the rational exploitation of idle natural resources or unexploited projects placed in trust shall constitute the sole guarantee of payment for the investment titles issued as a result of the securitization authorized through this Decree, and the State may not in any case issue sovereign or any other type of guarantee for their support. Under no circumstance may the Central Bank of Honduras or the State Department in charge of Finance constitute itself as guarantor thereof, which must be disclosed to investors at the time of purchase of the investment titles. The future flows placed in trust in the Trust as well as in the Sub-Trusts are declared as autonomous assets in that they are affected to serve as the sole and exclusive guarantee to the acquirers of the titles, and cannot be affected by actions or claims by third parties. In any case, any action or claim in relation thereto is by full right subordinated to the prior and preferential payment of the yield of the titles and their amortization.

The State, through the State Department in charge of Finance and by means of an instruction issued to the trustee, may invest the resources obtained from the issuance and placement of investment titles for the purposes established in Article 1 of this Decree. The foregoing is without prejudice to being able to serve, as a specific form of minimum direct public investment, which, in accordance with international practices, is necessary as seed capital to make the project for the exploitation of resources or infrastructure projects financially viable to which the corresponding issuance refers. The State Department in charge of Finance shall determine, following the respective technical analysis and within the process of issuance of titles for each case of rational exploitation of natural resources or infrastructure project as applicable, the portion to be applied to the expressed public debt and that which shall be allocated to the State's participation in the specific project.

The use of resources raised both by the placement of titles and those derived from the future cash flow of the exploitation of resources or the operation of projects for purposes other than those contemplated in the present Law is expressly prohibited. This prohibition particularly covers the use of funds collected through this program for current State expenditure other than public debt service, nor for payment of public debt incurred after the date this Decree enters into force.

In order to avoid doubts about the financial analyses or calculations required for their determination and the applicable rates, these shall be submitted to the International Financial Reporting Standards (IFRS).

Everything not provided for in the present Law and that refers to the structuring of Securitization, the issuance of investment titles, the relationship with investors, the hiring of operators and their compensation, the generation of income from cash flows of ongoing projects, the redemption of investments and the use of resources for the promotion of the country's development and its internal debt conversion, is resolved by the Technical Committee of the Trust, which shall enjoy full powers for these purposes, as the Trust has its own administrative independence, always and when said decisions concern the purposes thereof which cannot be altered or modified.

The State Department in charge of Finance shall issue the respective regulations within a period of fifteen (15) calendar days after this Law enters into force.

This Decree shall enter into force from the day of its publication in the Official Gazette La Gaceta. Given in the City of Tegucigalpa, municipality of the Central District, in the Session Hall of the National Congress, on the twenty-third day of the month of July of two thousand thirteen. MAURICIO OLIVA HERRERA PRESIDENT, BY THE LAW RIGOBERTO CHANG CASTILLO SECRETARY GLADIS AURORA LÓPEZ CALDERÓN SECRETARY To the Executive Branch. Therefore: Execute. Tegucigalpa, M.D.C., December 18, 2013. PORFIRIO LOBO SOSA PRESIDENT OF THE REPUBLIC THE STATE SECRETARY IN CHARGE OF FINANCE. WILFREDO CERRATO RODRÍGUEZ Secretariat of Foreign Relations of the Republic of Honduras