Fitch Ratings has affirmed
The National Scale Long-Term and Short-Term Ratings have also been affirmed at 'A-(mex)'/'F2(mex)'. Fitch has simultaneously removed all ratings from Rating Watch Negative and assigned a Negative Rating Outlook.
Key Rating Drivers
The rating affirmation and the resolution of the Rating Watch Negative reflects reduced near-term refinancing risk following the maturity extension of the
On
On
Fitch believes that the bond maturity extension and new credit facility are incrementally positive developments, which provide
The company has indicated that it plans to address upcoming maturities through the usage of revolving credit facilities, available cash and equivalents, local short- and long-term bond market issuances (the latter with a partial guarantee from local development agencies), access to other secured sources and reduced of originations (the issuer is originating around 80% of collections). Most of these strategies have some execution risks due to sensitivity to investor/market sentiment. On
Fitch forecasts the adjusted tangible leverage metric to increase to above 7x, but to remain below the rating sensitivity for a downgrade of 8x. As of 1Q22, Fitch's adjusted ratio of total debt-to-tangible equity stood at 6.4x, down slightly from 6.7x at YE 2021. Fitch applies a 70% haircut to the revaluation surplus related to the oil platform owned by the company, and adjusts for temporary impacts from derivative valuations on the balance sheet and capital through other comprehensive income items.
Fitch believes
SENIOR DEBT
The senior global debt rating is equalized with
HYBRID SECURITIES
Based on Fitch's analysis, the hybrid qualifies for 50% equity credit as it meets Fitch's criteria with regard to the ability to defer coupon payments, the existence of a coupon step-up of at least 500 basis points in the event of a change of control and its perpetual nature.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Reduced liquidity position, increased refinancing risks and failure to complete the company's medium-term funding strategies;
An increase in Fitch's adjusted total debt-to-tangible equity ratio above 8x and a pre-tax income to average assets ratio consistently below 1.5% or a material deterioration of asset quality.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Sustained improvements in the funding, liquidity and coverage profile, including addressing near- to medium-term refinancing risks, could result in the Outlook being revised to Stable;
Although not a baseline scenario due to the current Negative Outlook, ratings could potentially be upgraded over the medium-to-longer term if there is an improvement of the operating environment and market sentiment toward Mexican NBFIs that allows the company to strengthen its business profile, together with an improvement in pre-tax income to average assets ratio consistently above 3%; while maintaining Fitch's adjusted tangible leverage ratio below 5.5x.
SENIOR DEBT and HYBRID SECURITIES
The company's debt ratings would be expected to mirror any changes on those of
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Summary of Financial Adjustments
Fitch reclassified pre-paid expenses as intangibles and deducted from total equity due to low loss absorption capacity under stress.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unifin Financiera, S. A. B. de C. V. has an ESG Relevance Score of '4' for Financial Transparency due to
Unifin Financiera, S. A. B. de C. V. has an ESG Relevance Score of '4' for Management Strategy due to
Unifin Financiera, S. A. B. de C. V. has an ESG Relevance Score of '4' for Governance Structure due to concerns regarding the expansion into non-core strategies to sustain financial metrics, such as the acquisition of complex assets (oil platform) and the repurchase of bonds to prioritize profitability instead of liquidity preservation, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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