Shareholders Call on Mexican Shadow Bank to Sell U.S. Unit

Shareholders in troubled Mexican non-bank lender Credito Real will vote on proposals to sell the company’s U.S. operations at a meeting on Sept. 10.

A Credito Real spokesperson told Bloomberg News that the assembly had been called by a group of minority shareholders, who she declined to name.

The vote will come a month after Chief Executive Officer Carlos Ochoa hyped the division, Credito Real USA Finance, as a bright spot in its portfolio of loans. Credito Real’s bonds tumbled earlier this year after it increased non-performing loans in its audited 2020 accounts, shortly after the collapse of fellow non-bank lender Alpha Holding SA sparked worries about shadow banks in Mexico.

Shareholders Call on Mexican Shadow Bank to Sell U.S. Unit

In an emailed statement on Thursday, the company said that the shareholders’ proposals take up key ideas that Credito Real has expressed as part of its long-term strategy. 

“We have already taken initial steps to strengthen corporate transparency and governance and prioritize the company’s top-performing businesses,” the company said.

Shareholders will also vote on selling a Mexican company that is part of the small business portfolio, according to the filing late on Wednesday.

Greg Palffy, a trader and portfolio manager at Cazadores Investments in London, said the asset sales could bring in from $150 million to $200 million. He called the company’s perpetual bonds, which are trading below 77 cents on the dollar, one of the most-interesting buying opportunities in emerging-markets corporate credit. 

If the sales are successful in the fourth quarter and Credito Real can convince bondholders that it can repay a 170 million ($185 million) Swiss franc bond due February, Palffy said the perpetual bonds could jump into the mid-90s. Credito Real also needs to roll over nearly 6.5 billion pesos ($320 million) in bank financing this year.

However, Palffy also said pointed to Credito Real’s disclosure in its 2020 audited statements that showed 46% of its loan portfolio was composed of accrued interest. “That is a really high ratio, so that puts its asset quality into question and caused some investors to sell especially after what happened with Alpha Credits’s restatement and default.”

It is unclear which shareholders have called for the Sept. 10 meeting, where there will also be a vote on reducing the size of the board.

Read: Credito Real Rally Stumbles, Filing Shows Fidelity Sold Shares

Read: Credito Real Sees Record Volume With Citibanamex Cross Trades

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