NEW YORK -- Mexico's offer to exchange up to $20 billion of its $105 billion foreign debt for 20-year bonds is getting a good reception from regional banks and mixed reviews from investment firms that see the deal threatening their debt-swap business.

Mexico, in a proposal put together by Morgan Guaranty Trust, will take bids from banks and award to the highest bidders up to $20 billion of its commercial bank debt in exchange for $10 billion of 20-year Mexican bonds collateralized by U.S. Treasury issues with the same maturity.

The plan, which would eliminate more than one-third of Mexico's $53 billion in medium- and long-term sovereign bank debt, is sure to be accepted by some regional banks, especially since the Securities and Exchange Commission has ruled that selling debt sold at a discount would not mean marking down a whole portfolio.

The bonds will trade on the Luxembourg Stock Exchange. "There is no principal risk, that is guaranteed, so you can sell them at whatever the market values Mexican debt," one regional banker said.

NCNB Corp., the large Charlotte, N.C., bank holding company, said it is writing off 56 percent of its $107 million of Mexican debt in anticipation of submitting a bid for the bonds.

"We are not committed at all, but it does look like something that would be of interest to us," a spokeswoman for NCNB said. "We view the Morgan proposal as the only way to get all $107 million of Mexican exposure off of our books."

Not all comments were favorable.

Some investment bankers, who have been trying to build a secondary market in the debt and hatch schemes to package and sell it as junk bonds, sniffed at the scheme.

"Why should you take a 50 percent haircut on your Mexican debt in 20-year bonds when you can get 50 cents on the dollar cash in the secondary market," one investment banker said.

The problem is there are so few buyers of the debt that secondary market prices are somewhat arbitrary. "We determined the bonds would go for about 50 cents on the dollar when we made the decision on how much to write off," the NCNB spokeswoman said.

Mexico's temporary suspension of its debt-equity swap program removed "a good chunk of the only lively action in the debt-equity market, which is Mexico and Chile," the regional banker said.

The NCNB spokeswoman agreed. "There just isn't enough business for individual banks to swap more than a small portion of their exposure," she said. Debt-equity swaps have been done in amounts as small as $5 million and generally have not been larger than $100 million.

"The Mexican bond is a market-traded instrument," she said. "There is a clear market and the opportunity to sell it if that is what you want to do."

Morgan executives and other money center bankers said they believe getting rid of such a large chunk of debt will enhance the value of the remaining loans. "Mexico's servicing costs will be dramatically reduced -- the remaining debt will be very manageable for Mexico," a money center banker said.

"That is one argument to support the Morgan approach," the regional banker said. "The other is that it's an officially sponsored program."

Money center banks would not say if they plan to participate.

"It could affect the bidding if a Citibank or a Manny Hanny {Manufacturers Hanover Trust} said they would or would not offer their debt for sale," one banker said. Others indicated that holding the debt might look more palatable if there is less of it.

Banks that have taken writeoffs on their debt are the most logical candidates, including regionals Bank of Boston Corp., PNC Corp. and Riggs National Corp.

"The writeoffs are already there without hurting the bottom line for those in the banking community who followed Citibank's lead in the second quarter," the regional banker said, referring to the billions in reserves set aside after Citibank announced a $3 billion addition to its loan loss provision.

Do not expect the Luxembourg Stock Exchange to be flooded with Brazilian, Argentine or Venezuelan bonds in the near future, despite interest already expressed in Brazil.

Ulysses Guimaraes, leader of Brazil's Democratic Movement majority political party, visited Morgan last week to get details on the plan and later strongly endorsed debt bonds for Brazil.

"Brazil has to get its debt refinanced, build a track record of on-time debt servicing, and build its foreign reserves enough to finance purchase of the Treasury bond collateral before that can be considered," a money center bank said.

Argentina does not have enough reserves to buy the U.S. Treasury issues that would back the bonds nor does it have enough of a trade surplus to assure debt servicing.

"Venezuela and Chile are the only other Latin American nations that currently qualify," the banker said. "The Mexican bonds are not a solution to the debt problem, but another option that will ultimately help."