Credito Real prepares for bankruptcy filing after bond default

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(Bloomberg) – Credito Real SAB, Mexico’s largest payday lender, which fell into default earlier this year, is preparing for a potential bankruptcy filing in the United States as early as this week, according to people with knowledge of the situation.

The non-bank lender is seeking funding from existing creditors to help fund the bankruptcy process, said one of the people, who asked not to be identified because the talks are private.

The company has been working with creditors on a restructuring plan that would allow it to continue operating, after failing to repay holders of a maturing Swiss franc bond. Authorities said they saw no risk of contagion from Credito Real defaulting on the country’s financial system. However, bonds from other non-bank lenders like equipment leasing company Unifin have sunk since Credito Real defaulted.

Plans are not final and may change. A Credito Real representative declined to comment on Tuesday.

The company focuses on payroll and small business loans and has $1.9 billion in global notes out of total debt of MXN53.3 billion ($2.72 billion). Credito Real is Mexico’s second largest non-bank lender, after Unifin.

Credito Real’s ratings have been under pressure since April 2021, when the company disclosed revisions to its 2020 audited statement that showed a sharp increase in its non-performing loan portfolio.

The review came shortly after rival Alpha Holding SA disclosed a $200 million accounting error that sent its bonds plummeting and shook investor confidence in Mexico’s lightly regulated non-bank lending sector.

©2022 Bloomberg LP

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