Fitch Ratings has downgraded Unifin Financiera, S.A.B. de C.V.'s (Unifin) Long- and Short-Term Local and Foreign Currency Issuer Default Ratings (IDRs) to 'D' from 'RD'.

Fitch has also downgraded Unifin's Long- and Short-Term National Scale ratings to 'D(mex)' from 'RD(mex)'. In addition, Fitch has affirmed the ratings of the company's senior notes and hybrid securities at 'C'. A full list of rating actions is at the end of this commentary.

Key Rating Drivers

The downgrades reflect that a bankruptcy proceeding is ongoing, as signaled by the announcement made by the company on Nov. 8, 2022. According to the company's press release, the First District Court in Concurso Restructuring Proceeding Matters in Mexico City admitted the company's voluntary petition for a restructuring (concurso proceeding).

As of today, the company is not paying any of its creditors, its grace periods under its debt instruments have expired and is not originating loans or leases.

Rating Sensitivities

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The IDRs and debt ratings cannot be downgraded as they are at the lowest levels on Fitch's rating scales.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Fitch could reassess Unifin's credit profile and its debt issuance ratings if a debt restructuring process is undertaken and sufficient disclosure of the company's plans and financial information is provided;

The company's debt ratings are expected to move in tandem with any changes to Unifin's IDRs.

Fitch will monitor the sufficiency of information to evaluate the entity's creditworthiness, which could result in rating withdrawals at the current levels if the entity does not disclose sufficient information to Fitch and the market.

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 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579

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

Fitch revised the ESG Relevance Score for Management Strategy to '3' from '5' as it is minimally relevant in the context of Unifin's default status.

Fitch revised the ESG Relevance Score for Financial Transparency to '3' from '4' as it is minimally relevant in the context of Unifin's default status.

Fitch revised the ESG Relevance Score for Governance Structure to revise to '3' from '4' as it is minimally relevant in the context of Unifin's default status.

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.

(C) 2022 Electronic News Publishing, source ENP Newswire