Crédito Real, the largest multiple purpose financial company (Sofom) in Mexico, could file for bankruptcy in the United States under the Chapter 11 scheme, according to information from the group.
In a brief statement, the company reported that no final decision has been made yet; however, sofom sources reported that they are seeking to reach bankruptcy in the United States, under a pre-agreed agreement.
In Mexico, the company did not go to the Federal Institute of Commercial Bankruptcy (IFECOM) to reach an agreement with its local creditors.
Crédito Real is a Sofom specialized in granting loans to segments of the population not served by banks. It operates payroll loans to small businesses (SMEs) and cars. It grew in the Mexican market through bank loans, debt issuance in the local stock market and placement of bonds in foreign markets in various currencies such as dollars, pesos, euros, Swiss francs and even wanted to enter the yen market in Japan. .
the debacle
Credito Real, which was listed on the Mexican Stock Exchange (BMV) on October 17, 2012, through the private fund Nexxus Capital, issued debt in various currencies in the local and foreign markets over the years.
On February 9, the company failed to pay interest on a 170 million Swiss franc bond due that day.
The lack of payment of the revenues worried the market and the price of its shares suffered a strong setback on the BMV. That day, the value of its titles fell 12.5%, a drop in the year of 63% and 93% from its maximum price reached in 2015.
On June 1, the listing of its shares was suspended for not reporting its financial statements to the market and its capitalization value is nil.
Given the payment failure, the debt rating agency Fitch Ratings changed the outlook for the entire Sofome sector to deterioration from neutral.
For its part, the rating agency Moody’s, after the default, described the sector as lacking in transparency and in great need of better corporate governance.
Since the default, Credito Real’s 8% premium bond, due in January 2028, fell to 8 cents on the dollar in the market, as did notes from other brokers such as Unifin.
affect the industry
Verónica Chau, a sofom analyst at Fitch Ratings, commented that the problem of another sofom, Alfa Credit, last year and what happened with Crédito Real affected the sector, since “they depend on market confidence.”
In an interview, the expert stressed that now it will be very difficult for intermediaries to place debt abroad and in the case of the Mexican market, the prizes that will be requested will be very high.
“It would have been different if he paid off, refinanced and continued with investor confidence, but it created a lot of noise in the market,” he said.
“The price of the bonds in the international market is affected and the bonds are like a measurement of the sensitivity of the investors in these papers,” he added.
The foregoing will be reflected in global debt funding pressures and for all Sofomes operating in the country.
The expert stressed that intermediaries will continue to access bank financing, with more risk and securitizations will be more expensive, investors will be more careful.
Moody’s published in a report that the default would be reflected in the reduction to the market, low in its ability to take credit and refinance debt.
The risk rating agency calculates that the largest companies in the sofome sector have a debt of 2.9 billion pesos in bank loans and bond issues.
On Tuesday, the sofom Factor Exprés placed 4.5-year debt for 150 million pesos in BIVA. Enrique Presburger, its general director, explained that the sofomes are a consolidated financial figure in the market, which represents 5% of GDP and has more than 900,000 million pesos in placements in the national stock market.
“Sadly, I do see investors who are retracting, what happened with Crédito Real is still not 100% known, we understand that perhaps it was a management decision, perhaps they are internal decisions about how the company was managed,” said Georgina Boysselle, managing partner of Atmósfera Estrategia, an investment bank specializing in structuring public and private debt and raising private capital.
He added that Crédito Real is a company whose portfolio behaves very well. Several of its products have delinquency rates that are in line with the market, they continue to be charged and perform well.
“I would be worried if the portfolios were the ones that deteriorate, but they have behaved well, we went through a pandemic that I think was a natural filter to see which sofomes were doing their analysis and origination well. During 2020 and 2021, the sofomes that did collect, that did have flow, means that they did their collection well, ”he added. (With information from Judith Santiago)