Credito Real Warns Creditor Deal at Risk Unless Cases Dropped

Credito Real warned the payroll lender plans to terminate an agreement with creditors to file a prepackaged bankruptcy in Mexican courts unless other legal challenges are withdrawn, according to court documents.

(Bloomberg) — Credito Real warned the payroll lender plans to terminate an agreement with creditors to file a prepackaged bankruptcy in Mexican courts unless other legal challenges are withdrawn, according to court documents.

The company told creditors it would only consider a 30-day extension of a deadline that expired Aug. 10 if the proceedings are dropped, according to a filing by creditors in Delaware on Monday. Last week, people familiar said the company and a group of creditors were planning an extension to get a majority of bondholders to sign on to the bankruptcy proposal.

The filing is the latest twist in the aftermath of the non-bank lender’s default on $1.9 billion of dollar bonds in February 2022. Lawyers for holders of those bonds have been pushing for a deal that would allow creditors to recoup as much as 23 cents on the dollar through the local bankruptcy liquidation. Notes due in 2028 exchanged hands last week for around 10.8 cents, according to Trace data.

The two sides reached a so-called restructuring support agreement on May 15. But a group of creditors overseeing its implementation fell just short of getting the needed majority of bondholders to sign on.

The company said it may agree to the additional time if certain legal challenges in Mexico courts were dropped, according to an Aug. 11 letter by Credito Real lawyer John Cunningham of White & Case LLP. If the conditions were not met by Monday, the company would terminate the agreement, he wrote in a letter. Creditors included a copy of the letter in their Aug. 14 court filing.

Creditors argued the timetable was unreasonable. It was unclear if those cases had been withdrawn as the Mexican court filings are not readily accessible.

Cunningham, the company and lawyers for the creditors didn’t reply to requests for comment.

The case is Credito Real, S.A.B., U.S. Bankruptcy Court, District of Delaware (Wilmington).

–With assistance from Steven Church.

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