Non-bank financiers in Mexico and the Latin American region could face pressure in 2023 to access financing, following the default of Mexarrend (Tangelo), according to analysts at Moody’s Investor Service.
The default is likely to restrict access for financiers in the region to refinance debt and expiring credit lines, Moody’s analysts Rodrigo Marimon, Felipe Carvallo and Saúl Atlatenco wrote in a note.
Mexarrend (Tangelo) reported on January 17 that it would not pay its next maturities in the midst of an accounting review that found errors in recording financial assets.
The lessor focused on small and medium-sized companies did not pay a commitment with its holders scheduled for January 19 for MXN$85 million and anticipated that it will not make the interest payment for US$14.5 million of its notes, scheduled for January 24.
Moody’s does not have Mexarrend among the companies to which it provides credit rating services.
Other rating agencies such as S&P Global Ratings and Fitch Ratings downgraded Mexarrend’s ratings to default level.
Mexarrend, which officially became Tangelo in December after finalizing its merger with the Colombian fintech Zinobe, joined the group of non-bank financiers with liquidity problems that have led them to default, such as Unifin, Crédito Real and Alpha Credit.
MEGA SERVICES AND INDEPENDENCIA FINANCIAL UNDER THE MAGNIFYING GLASS
The volatility generated by Mexarrend sets its sights on Operadora de Servicios Mega and Financiera Independencia, the two Mexican non-bank financial institutions that are followed by Moody’s Investors Service.
Given concerns about the sector, Operadora de Servicios Mega, a Mexican lessor, has made voluntary public offerings for a portion of its outstanding debt, which have shown investor confidence in its liquidity, Moody’s analysts wrote.
In December 2022, Mega made a voluntary public offering of the outstanding senior notes, surrounding the refinancing of its 2025 bond maturity.
The offered price was 3% above the market price at the time, and received offers for only 12% of the total amount, according to Moody’s.
“However, the pressure is likely to persist into 2023 as the difficult operating environment in Mexico will affect Mega’s asset quality,” the analysts wrote.
For Moody’s Investors Service, until now Financiera Independencia, dedicated to granting personal loans, has been able to better withstand the difficult operating environment for Mexican non-bank lenders, something that it attributes to the high turnover rate of its loan portfolio, the moderation in the loan origination, access to bank lines, as well as the expansion of its franchise to the United States.
“However, the operating environment will also add more pressure on Financiera Independencia’s financial performance in 2023,” Moody’s Investors Service said.
Moody’s has assigned a Ba2 rating, the second level within the speculative range, for Operadora de Servicios Mega.
Financiera Independencia has a credit rating of B1, the fourth level within the speculative range.
Both companies with a stable outlook.
With information from Bloomberg