- New DFC $10 million unsecured debt facility closed
- FIRA increased approved line to $3.8 billion pesos
- Banco Covalto receives Investment Grade rating from HR Ratings, the leading Mexico-based ratings agency, reflecting its strong levels of capitalization and robust credit performance
MEXICO CITY – October 17, 2022 — Banco Covalto S.A. Institución de Banca Múltiple (Banco Covalto), the fully regulated banking arm of Covalto Ltd. (“Covalto”), a leading digital banking and services platform for SMEs in Mexico, continues to strengthen its financial position and announced today the closing a USD $10 million unsecured debt facility from U.S. International Development Finance Corporation (DFC) and an expansion of its current credit line with Mexican government-sponsored trust FIRA to MXN $3.8 billion (~USD $190 million).
Banco Covalto also received an Investment Grade rating from HR Ratings, the leading Mexico-based ratings agency registered with the SEC, reflecting its high capitalization levels and low non-performing loan (NPL) ratio. The capitalization level (ICAP in Mexico) was last reported at 23.0% and is expected to significantly increase following a subsequent capital injection in early October. Meanwhile asset quality levels reflect strong credit performance as the NPL ratio was reported at 2.6% as of the end of August.
The news follows Covalto’s recent announcement of its planned merger with LIV Capital Acquisition Corp. II (“LIVB”) (NASDAQ: LIVB), a special purpose acquisition company launched by Mexico City-based fund LIV Capital. This transaction is expected to result in Covalto becoming a U.S.-listed company, marking the first-time shares of a Mexican fintech will publicly trade on a U.S. stock exchange.
The United States International Development Finance Corporation (DFC) is the U.S. federal government’s development finance institution, which primarily provides financing for investments in developing countries to drive economic growth, create stability and improve livelihoods. The closing of this USD $10 million unsecured debt facility is particularly significant in view of the challenges that some of Mexico’s Non-Bank Financial Institutions (NBFIs) are currently facing. The additional capital, coupled with the further diversification of its funding sources, highlights the benefits that Covalto obtains from owning a fully regulated bank. Covalto believes that closing this transaction amid the current volatile environment in the NBFI space reflects the trust that global investors have in the company’s current fundamentals and long-term perspectives.
Established in 1954, the Trust Fund for Rural Development (FIRA) is the Mexican federal government’s development bank, which mainly offers financing to the agribusiness sector in Mexico. Its decision to expand the credit line to Banco Covalto from MXN $2 billion (~USD $100 million) to MXN $3.8 billion (~USD $180 million) is a solid vote of confidence in Covalto’s business model and its ability to scale its portfolio in a sustainable manner.
On August 31, 2022 ratings agency HR Ratings assigned Banco Covalto an investment grade BBB- rating, which reflects the company’s robust capitalization as well as its strong credit performance. The ratings report takes into consideration Covalto’s expected SPAC transaction with LIVB, the sharp reduction in nonperforming loans as well as the bank’s sustainable growth perspectives, which show a clear path to profitability. The HR Ratings rating marks the second investment grade rating for Banco Covalto, as PCR Verum upgraded the bank from BB+ to BBB- in June 2022.
About Covalto
Covalto is a leading digital banking and services platform for SMEs in Mexico. The company provides a one-stop solution by bringing together a multi-product credit offering, banking and payments services, and a full suite of business analytics tools. We use a combination of cutting-edge proprietary software, innovative applications of data science and advanced internal processes for decision making and product structuring. Covalto supports the financing needs of Mexican SMEs via products that are competitive in price, speed of delivery and quality of customer experience. In June 2021, Covalto acquired Banco Finterra, becoming the first, and currently only Mexican fintech to date, to acquire a regulated bank.
Since inception, the company has received backing from a world-class group of institutional investors including QED Investors, Kaszek, Goldman Sachs, Point72 Ventures, IGNIA, Credit Suisse and Victory Park Capital. The company is based in Mexico City and currently employs approximately 400 people.
To learn more about Covalto, visit covalto.com.
For Media:
Damian Fraser, Miranda Partners
damian.fraser@miranda-newswire.com
Tania Rojas, Miranda Partners
Full Press Release: Covalto, a Leading Digital Banking and Services Platform for SMEs in Mexico, receives additional financing and ratings upgrade