Metrofinanciera Faces Challenges

To hear some analysts speak, you may fear that Metrofinanciera is heading for default. Critics say it is growing too fast and ultimately unsustainable. S&P recently cut the credit to B+ and its perp to CCC+, voicing concerns about the company management. But despite a highly speculative credit rating, the firm still appears to have potential. “There’s still a lot of room for improvement, particularly in communicating the strategy to the investment community,” says Eugene Popov, senior EM corporate credit analyst at Dresdner Kleinwort, which underwrote the 11.25% coupon perpetual issue in 2006. “They have some bumps on the road. It’s not smooth sailing, but it’s not a disaster,” says Philip Kibel, senior vice president at Moody’s, which rates the Sofol B1. Popov says there is a significant asset/liability mismatch, but the company is aware of it. “The way they can address this issue is by increasing the securitization of mortgage and construction loans,” says Popov. “If they run into bigger problems than it faces at the moment, there is a high probability that another Sofol or bank will be inclined to buy it out,” he adds. According to Popov, the key risk for Metrofinanciera is the overall macro situation in Mexico. “For all the shortfalls and increased credit risk profile, it’s a valid ongoing business,” says the analyst. Metrofinanciera last week announced a MXP2.15bn cross-border construction loan securitization due 2014 through Credit Suisse, with Banco Invex as trustee.