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Credito Real’s bond prices have risen to about 13 cents on the dollar following hopes of a deal that will allow investors to recoup up to 23% of their investment. Credito Real proposed the debt restructuring deal in May which would be overseen by a federal bankruptcy judge in Mexico. The deal will go through if a majority of unsecured creditors agree to it within 2 months. This follows the non-bank lender’s default on $1.9bn of its dollar bonds in February 2022, which caused its bond prices to plummet to as low as 1 cent on the dollar in October 2022. Some bondholders have forced Credito Real to undergo bankruptcy proceedings in the US instead of Mexico City, whose court processes are said to be ‘opaque and complex’ and result in payments being made to local banks and investors first, showing some bias against offshore bondholders. This lack of transparency is also reflected in the debt restructuring talks for other Mexican non-bank lenders like Unifin and AlphaCredit in the country’s courts. Unifin and AlphaCredit have also defaulted on their bonds last year and applied for bankruptcy, severely damaging investors’ confidence in the shadow banking industry. Moreover, Credito Real has not filed any financial statements since Q4 2021 nor posted any audited financial information since 2020, making it challenging to estimate a recovery value. This is similar to Unifin’s and AlphaCredit’s situation whereby both parties lacked available financial information to estimate their recovery values.
Credito Real’s bonds have ticked up by about 10-11 cents on the dollar since the start of this year but are still trading at deeply distressed levels. Its 9.5% 2026s are currently trading at 13.6 cents on the dollar.
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