Unifin Financiera S.A.B. de C.V. (Unifin) was downgraded to BB- from BB by Fitch on a downward revision of profitability assessment/business profile and low core metrics. Fitch also revised down Unifin’s funding, liquidity and coverage assessment metrics. International markets contribute to about 58.4% of its total funding and Unifin’s access has been reduced. Debt maturities over the next one year stand at ~25.5% of its total funding. The lender tapped local bond markets to raise funding recently and is raising funds via alternative strategies like short-term unsecured notes, credit lines etc. Fitch notes that its leverage metrics are “highly sensitive” – for example its debt-to-tangible equity rose to 7.7x in Q4 2021 from 6.3x the year before. Also, it notes that  while NPLs were controlled in 2021 at 4.5%, asset quality has been pressured by increased charge-offs and foreclosed assets. Earnings were also a negative factor although it improved slightly in the previous year. Fitch says that profitability is not expected to “improve relevantly during 2022”. Lastly, corporate governance issues also weigh on the company as it has focused on non-core strategies to sustain financial metrics i.e.,  acquisition of complex assets like oil rigs and repurchasing of bonds which prioritizes profitability instead of liquidity.

Unifin’s 7% dollar bonds due August 2022 were down over 4 points to 78.55 cents on the dollar.

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