Fitch Ratings on Jan. 15 placed Mexico-based Mexarrend SAPI de CV's ratings on Rating Watch Negative due to the deterioration in the company's capitalization and leverage ratios.
Mexarrend's tangible leverage ratio unexpectedly grew above the company's and Fitch's expectations, following extraordinary bond-related expenses and a significant growth in its balance sheet. As a result, the company's Fitch leverage sensitivity breached 7x as of September 2019, the rating agency said.
Possible additional capital injections should help in easing Mexarrend's leverage pressures, but there is no explicit commitment from shareholders to make them on a specific date in 2020, Fitch said.
Mexarrend's ratings are highly anchored on its company profile, which is marked by a well-positioned and growing franchise among local independent leasing companies, although small within the general financial system, as well as by a specialized business model.
The ratings also consider the company's inherent risks related to high organic and inorganic loan growth, asset quality ratios that are weaker than peers, a funding mix with a good portion of unsecured financing sources and a relatively adequate liquidity position, Fitch said.
Mexarrend was formerly known as Docuformas SAPI de CV.