Crédito Real, a finance company that grants loans to small and medium-sized companies, failed to meet the payment date of a bond for 170 million Swiss francs (184 million dollars) due on February 9.
This situation caused a strong punishment of investors in the Mexican Stock Exchange (BMV), causing a loss of 365 million pesos in its market value.
Although the company reported that it is already working on a strategy to restructure its liabilities, the announcement was not enough to stop its losses in the stock market, linking two sessions of deep adjustments that have cost it an accumulated cut of 981 million pesos in its capitalization. in a bag.
With this, the market value went from 1,908 million pesos to 927 million pesos. Its shares have depreciated 51.44% in the last two days, from 4.86 to 2.36 pesos each.
The firm led by Carlos Ochoa revealed in a statement published on the BMV that it is waiting to obtain a “structured guaranteed loan” to meet its payment commitments.
It also announced that in order to remain a viable business, it has hired the multinational law firm DLA Piper LLP as legal advisor and FTI Consulting as restructuring advisor.
“Considering the expiration date of this bond results in a payment default (…) In collaboration with its advisers, the company will continue working on resolving its short- and long-term financing situation, and on strengthening its financial position. ”, announced the institution in one of its announcements to the market.
Downgrade your rating
Credito Real’s fragile liquidity has also caused a downgrade in its credit rating, which is already classified as “speculative-grade bonds.”
Fitch Ratings and S&P Global Ratings on Friday cut the issuer’s rating from B-‘ to ‘CC’ and from ‘B-‘ to ‘CCC’, respectively, on their global scale. This Wednesday Fitch downgraded it to ‘RD’ or restricted default from ‘CC’.
Although it was unable to face the maturity of the bond in Swiss francs, Crédito Real announced that on February 7 it paid the coupon corresponding to the Senior Notes maturing in 2026.
The finance company that operates in Mexico, the United States, Costa Rica, Panama, Nicaragua and Honduras, also carries a heavy debt. Its total liabilities were 54,832 million pesos until the end of September 2021.
Of said amount, 62% are bonds placed in the financial market and 61% are in dollars, with an average maturity of 3.3 years and a weighted average interest rate of 7.25 percent.
Crédito Real faces maturities for 16,906 million pesos this year and by 2023 it must pay off another 9,686 million pesos.
“The panorama in terms of refinancing, for the rest of the year, looks complicated, due to the higher risk of the issuer, in addition to the environment of rising interest rates,” said Eduardo López Ponce, analyst at Banco Ve por Más (BX + ).
He explained that the issuer’s financial situation has generated additional pressure on the listing of its securities on the Stock Exchange.
Its weak stock market performance had already been observed since 2021, since from January of that year until the end of this Wednesday its titles registered a drop of 81%, which translates into a loss of 3,949 million pesos in market value.
Credito Real’s financial problems worsened with the coronavirus pandemic. Given this, it has put assets up for sale to obtain liquidity.
On January 17, it announced that it had received six non-binding offers related to the sale of 100% of its subsidiary Crédito Real USA Finance, for which it began the second and last stage of the process that it expects to conclude during the first quarter of this year.
It is also about to finalize the sale of its loan portfolio to small and medium-sized companies in Mexico for 1,500 million pesos, whose sale was announced to the markets on October 26. “The process is ongoing and has been structured to maximize the receipt of cash resources, all in compliance with the provisions of the Federal Law of Economic Competition in Mexico,” said the station.
At the end of December, it sold a part of its credit portfolio for small and medium-sized companies linked to its subsidiary Camino Financial in the United States for 45 million dollars to meet its short-term financial commitments. Today it has a 36.6% stake in the subsidiary.
The reality is different from what the administration exposed in its last call with analysts, when it said that its financial position is stable. Crédito Real will present its results to the market on February 23 and will hold a meeting with analysts to assess its financial situation.
In trouble
Who is Crédito Real, the finance company for SMEs?
Crédito Real is a Multiple Purpose Financial Company (Sofom) dedicated to granting payroll and car loans, as well as to small and medium-sized companies (SMEs). It was founded in 1993 in an alliance between Mabe and GE Capital (a year later the latter sold its stake to the partners of the appliance brand).
Today, its main shareholder is still the Berrondo family, which holds 25.4% of the shares.
The Saiz family, founders of Bancrecer in the 1970s, have also been shareholders since 1993, with a 6.3 percent stake. The remaining 68.3% is dispersed among other investors.
Crédito Real began granting loans for the purchase of durable goods and in 1994 it made its first debt issue in the local market for 20 million pesos. In 2010, it debuted in the international debt market with a bond for 210 million dollars.
By 2020, it had already issued bonds abroad, in European countries and the United States, and was even targeting Asia, with placement plans in Japan to take advantage of low interest rates and diversify the investor base.
Over the years, the operations of the company, which also has factoring and leasing businesses, crossed borders to reach the United States, Costa Rica, Panama, and Nicaragua. Mexico accounts for about 80 percent.
The firm has also had the backing of private capital funds. Nexxus Capital, one of the largest, acquired a 22.5% stake in November 2007. In that year, the sofom had a credit portfolio of 2,118 million pesos.
This was an impulse that led Credito Real to be listed on the BMV, with an Initial Public Offering of 2,556 million pesos, at 22 pesos per share. Today their titles are worth 2.36 pesos.
The station came from an attractive sector due to the lack of financing for SMEs and the lower sector of the population. As of the third quarter of 2021, it reported a total credit portfolio of 57,152 million pesos. And a debt of 54,832 million pesos.