Unifin Financiera SAB de CV
BMV:UNIFINA
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Unifin Financiera SAB de CV
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Good afternoon. And welcome to UNIFIN's Second Quarter 2022 Conference Call. [Instructions operator] If you've not yet received a copy of the earnings release, you can find it on UNIFIN's website at www.unifin.com.mx or please feel free to contact the Investor Relations team at unifin_ri@unifin.com.mx and then we'll provide you with a copy immediately.
Forward-looking statements may be made during this conference call. These do not necessarily take into consideration changing economic circumstances, industry conditions, the company's performance or financial results. These forward-looking statements are based on several assumptions and factors that could change causing actual results to differ from current expectations materially. Therefore, UNIFIN ask that you refer to the disclaimer located in the earnings release before making any investment decision.
Next, we would like to introduce Mr. Sergio Camacho, Chief Executive Officer. He will discuss second quarter 2022 results. Mr. Camacho, you may begin.
Thank you, and good morning, everyone. Today, here with me are Sergio Cancino, Chief Financial Officer; Mariana Rojo, Head of Corporate, Finance and Investor Relations; and Nayeli Robles, Head of Economic Analysis and Strategy. After discussing our second quarter results, we will open for our usual Q&A session.
First, I would like to mention that during the quarter, we successfully reached an agreement with the holders of our $200 million 7% senior unsecured notes due in 2022 to extend our maturity to May 2024. This transaction demonstrates the support for UNIFIN from leading institutional investors and their confidence in UNIFIN's outlook and its differentiation from some other Mexican nonbank financial institutions whose problems have reduced for now the appetite for bonds in the sector. Also, we have renewed all of our revolving credit lines in 2022 and closed a new private securitization for up to $500 million, which we will discuss in more detail later.
In recent months, the Mexican nonbanking financial sector has gone through a major crisis with the collapse of 2 large players in the payroll lending market. At UNIFIN, we have no exposure to payroll lending, and our leasing business is subject to completely different earnings and risk fundamentals. That said, there is a clear reduction in overall credit available to Mexican nonbank financial. As market leaders in leasing and with continued access to financing, we will open to any opportunities that arise from tighter credit conditions in the sector, always keeping in mind our healthy origination and risk management strategy. At the same time, through Uniclick, we're working even more closely with small- and medium-sized companies in Mexico, serving their financing needs in an effective and secure manner as demonstrated by strong origination in the sector.
Turning to our portfolio. The total loan portfolio reached MXN 76.2 billion in the second quarter, a 14.1% increase compared to the second quarter of last year. We were able to close with a diversified portfolio in terms of sectors thanks to our continued efforts to target the more resilient sectors with the best conversion rates. We added more than 1,700 clients total portfolio, reaching 11,852 clients by the end of the second quarter.
Moving on to originations. They decreased by 28.1% during the quarter, closing at MXN 4.7 billion. We have been slowing the rate of our originations for the past months in order to favor cash flow generation. However, once shown that our business model is capable of doing this, we will increase originations in the coming quarters for the benefit of all of our stakeholders. We are continuously monitoring our portfolio and identifying the most resilient sector with the best conversion rates. I would like to remind you that our origination strategy is based on sophisticated risk metrics and focused on 2 main objectives: prospecting strategic economic sectors with high growth potential and maintaining a diverse portfolio by segment and asset type.
Moving on to asset quality. Nonperforming loans remain unchanged compared to the second quarter of last year, closing at 4.6%. We expect NPLs to remain at similar levels through the rest of the year. We are not expecting further deterioration of our portfolio. Collections increased 6.8% when compared to the same period of last year, closing at MXN 6.5 billion driven by the economic recovery, asset quality improvement as well as our proactive collection efforts and constant risk monitoring. The NPL coverage ratio for the second quarter closed at 78.5%. The loan loss reserve for the second quarter was MXN 2.724 billion, 9.9% higher than the second quarter of last year.
Split by business line, our auto loans factoring and other loan lines are 100% covered. Leasing, our largest business line, had a coverage ratio of 66.5%. Total financing liabilities closed at MXN 79.3 billion, a 13.5% increase compared to $69.9 billion in the second quarter of last year. Average maturity was 40 months, and the total average rate was 11%.
Unsecured loans accounted for 70.7%. Unsecured loans accounted for 29.3% of the total debt at the end of the quarter. UNIFIN financial liabilities are split between U.S. dollar and Mexican peso, 64.5% and 35.5%, respectively. Despite the adverse macroeconomic environment [ that surrounds some ] banking financial institutions, we have already raised around $519 million in this year. I will also like to highlight that we continue with our available credit facilities.
During the quarter, the company closed a private securitization for an amount of $500 million, which includes $200 million of [ our warehouse ] facility. The proceeds of these loans were used by UNIFIN for general corporate purposes, including the refinancing of indebtedness. For the second half of the year, we will continue to seek alternative funding sources. We will seek to tap the local bond market during the third quarter of this year with a new long-term issuance for up to MXN 4 billion with a partial guarantee from development banks that will increase our investor base and depth of the transaction. In addition, we continue working [ on some restructures ] for around $200 million in the next 6 months. We are evaluating the best funding options for the company. The capitalization ratio stood at 17.9% in the quarter, a decline versus the last year. The financial leverage ratio rose 5x from 4.6x in the second quarter of last year.
Interest income increased by 4.3% versus the second quarter of last year to MXN 3 billion, with a 6.2% increase in leasing and 4.7x growth in Uniclick. Leasing represents 72% of interest income compared to 71% in the second quarter of last year. The portfolio yield stood at 16.8%, a 40 bps decline when compared to the first quarter of this year. The adjusted financial margin for the second quarter closed at MXN 920 million, a 13% increase compared to last year. Interest cost decreased 6.2%, reaching MXN 1.8 billion. NIM reached 6%, a slight increase compared to the second quarter of last year. OpEx as a percentage of sales went from 12.8% in the second quarter of last year to 13.9% in the second quarter of this year as a result of increased costs related to Uniclick growth.
Net income from the quarter increased 1.6% compared to last year to reach MXN 342 million driven by higher interest income, lower interest costs and stable asset quality. Return on assets increased compared to the same quarter of 2021 closing at 1.7%, while return on equity increased from 10.1% to 12.7% in this quarter driven by sequentially higher net income.
Uniclick continues to deliver good results. Interest income related to Uniclick increased almost 5x compared to the second quarter of last year. Uniclick achieved originations of MXN 672 million during the period, a 78% increase when compared to the same period of last year. Uniclick represents 14.2% of the quarter originations compared to 5.7% in the second quarter of last year. We expect Uniclick to continue to expand its market share and increase its share in our portfolio. Uniclick has demonstrated its capacity to satisfy the needs of Mexican SMEs. This business line enables us to expand our digital capabilities, while maintaining the leading position we already have in the market. We remain optimistic about this business line as they open to analyze potential expansion opportunities.
Thank you for listening. We would like to open now our Q&A session.
[Operator Instructions] Our first question is from Gilberto Garcia with Barclays.
I have several questions. First, on the improvement in the financial margin. Did you recognize any gains related to bond repurchases in the quarter? And if so, how much?
Gilberto, yes, we recognized 200 million.
Okay. And related to that, do you plan on additional bond repurchases in the next months? I remember you had said that you were no longer considering it given that the rating agencies did not really think that was the best course of action. What can you tell us about your plans going forward?
We [ had goals ] with them. And after signing the extension and the facility from Crédit Suisse, they changed their mind.
Okay. Good. And I guess related to the Crédit Suisse facility, can you tell us how much -- what the rate is for that facility and how much did you have to pledge in assets and how much do you have remaining in your ability to pledge going forward?
The pledge is somehow confidential. The rate is TIIE plus 5.
TIIE plus 5%, you said?
Yes, 5.5...
5.5%. Understood. And then...
In pesos -- [ converted ] in pesos.
Right. Yes. You said this is -- like you gave the equivalent amount, but the denomination is in pesos, right?
[indiscernible] Yes.
Okay. Great. Understood. And then shifting to your cash flow for the quarter, we saw significant outflows in other assets and other liabilities for about MXN 1 billion. Can you tell us what that was related to?
Yes. Just give me one second. Those that you are mentioning are noncash accounts, right?
I mean it's other assets and other liabilities.
Yes, it has to do with derivates, so they are noncash. If not, I will get back to you with that detail to make sure that I'm saying the right answer.
Okay. Great. And just related -- also related to that, why were collections down quarter-on-quarter when the portfolio was up?
The portfolio was up basically at the end of the quarter. I mean -- and as I said, we have this concern from many of you and basically also for the rating agencies, putting us in comparison to a request that was made to Crédito Real to slow down originations and get more collections. We have shown that over the last couple of quarters. And what I said has to do with once that we have proven that our business model is capable of doing this, we need to continue living. So that's why I said that we are going to start increasing our origination rate. And basically, the origination that we report in this quarter was made in the last 15 days of June. So that's the reason why you're seeing that number. It was basically made at the end of the quarter. But getting back to our strategy now to continue an up and running business, that's something that we need to do.
Okay. Okay. Understood. That's clear. And lastly...
And also, you need -- sorry, Gilberto. And also, you need to remember that in the first quarter of last year -- of this year, we reported that there was a deferred payment on the fourth quarter of last year. And we said that on a seasonality effect, if you remember what we said on the last quarter. So that also has to do with that change.
Okay. And lastly for now, are there any updates on the drillship? You mentioned previously that you were pursuing a sale. Is that still ongoing?
Sorry, I didn't get the question. Sorry for that.
The drillship, the oil rig. Any updates on that?
Well, we continue on that. The interest for the operator to purchase the drill continues there. He hasn't found the funding for doing that. In the meantime, we are seeing some other alternatives because as I said, I mean, if I go with the strategy of the company and enhancing our SG&A effort, that drill does not fit in the future strategy of the company. So eventually, we're going to do something with it. However, it's, as I have said, one of the most successful assets that right now Pemex has on their strategy for exploring oil. As I said, this drill has a calendar for drilling up to 2025. So it's also very relevant to Pemex. But getting back to the strategy of the company, eventually, we will dispose that asset at the best opportunity.
Okay. And a quick follow-up, if I may, on the NAFIN guarantees option. You mentioned that you expect to close that this second half of this year. Have you had any conversations with potential investors to get a sense of what sort of rate you could get there? Or any other details you could share at this point?
Yes. I mean on the rate, no, because that is going to be decided, I would say, one week before the issuance depending on how the rates are. What I can disclose is that the process of the guarantees continues their schedule. Of course, with all the noise that has been made by other nonbanking financial institutions, everything has taken more time than expected, and we report that on the last quarter results with the audit and so forth so on. So the amount that we're seeing for that issuance continues to be at MXN 4 billion. We are confident that the appetite for that paper continues to be there, of course, enhanced by the partial guarantees of Nafinsa and Bancomext. That's what I can disclose.
Our next question is from the line of Joao Rosado with Finantia.
Congrats on some of the measures you managed to implement, especially regarding liquidity. I have a follow-up question from Enrique and to just better understand collections versus originations and the portfolio final position because I didn't fully understand why the fact that some of the origination efforts have been made in the last 15 days of the quarter affect the total size of the portfolio, i.e., if you have actually collected more than what you have originated irrespective of whether it was beginning or end of the quarter, portfolio size should have reduced.
Give me one second. What happened, it's not linear, the number. It's not a math -- a simple math. You have to consider that our NPL went from 4.2% to 4.6%, and of course, that has an impact on the portfolio. Also, we have some leases that are done in dollars, and on that, we have an FX effect for increasing the portfolio in pesos. And that's basically the main reasons for that change. I'm trying to get that math that you are making with regards to collections and the size of the portfolio.
And just a follow-up here. So you've mentioned that it's very likely that you will increase collections -- pardon, you will increase origination versus collection to keep the portfolio growing. I just wanted to understand, given there's still some issues regarding funding and mostly cost of funding, what makes you change your mind regarding the pace of originations? i.e., if the market, especially the dollar market, is not fully convinced on your ability to funding, why are you turning the machine back on? Let's put it that way.
Because we have done everything that was on our hands to change that perception that for whatever reason has not been changed. And I cannot continue with our strategy of reducing the origination just to make people feel okay with our strategy. I mean we have a business to run. And going within that strategy and maintain that strategy is going to reduce the business to 0. And then on that case, for our maturities that are 2029, 2028, I mean, there's not going to be any portfolio to pay for that. So the point here is that we have done everything -- everything that we commit over the last couple of quarters, we have done and we have executed and actually with some positive news like the facility that we signed with Crédit Suisse. So the point that I'm making is that we need to get back to our business model, of course, being very prudent and prioritizing the funding capability that we can have. But eventually, I cannot continue without a strategy in the long term.
Well, but if you -- if the portfolio actually ran down and NPLs were very low, you would be able to repay all the debt. So you will have not a portfolio, but cash to pay down debt. I mean I understand what you're coming from. I'm just thinking that it could be a bit badly perceived by the market and could have repercussions on your [indiscernible].
Sorry for being so frank and so on with this answer, Joao. The market has been irrational overall. And no matter what I do, and I have discussed that directly with many, many investors, no matter what I do, they are not reacting on the fundamentals of the company. So I was very sensitive to downgrades from rating agencies. I have been very, very clear and open and been in every single conference we have been invited, putting my face in front of all of you. And despite everything that we have done, the market is not reacting to everything that we have done. So then why should I continue with this strategy? The market is not accepting everything that we're doing, and I'm just [ accelerating ] my commercial position and of course, the expectations for having a very successful business as we have been over the last 30 years. I mean, honestly -- I mean, why would we -- I mean, what will you do on my seat to really satisfy what the market is expecting? I mean we have...
Obviously, I have a conflict of interest here because I'm a bondholder. But...
Yes, but you're not the only one, let me be very honest. I mean you're not the only one. I mean I have banks, I have shareholders, I have many other stakeholders out there. And just for being as prudent as we have been over the last quarters and having no positive reaction from the market, actually, it has even gotten worse. I need a business to run -- I mean, I have responsibility also over 1,000 families that work here and more than 11,000 clients.
And I understand that view. It's just not -- as long as you need the market for funding, there is no...
I'm proving the market that we have found alternative source of funding as the credit facility from Crédit Suisse has shown and also our plan to tap the local market.
I hope you're successful. [ Best regards ].
Well, that's what we are working.
Our next question is from the line of Natalia Corfield with JPMorgan.
So I have a follow-up, first, from the first question. Just to confirm, you said that you have 200 million in gains from bond purchase in the second quarter. So I would like to confirm that.
Yes.
Okay. And I'd like to talk a little bit on asset quality because there was a deterioration this quarter, particularly in leasing and Uniclick. We saw an increase in your NPL ratio. I would like to know the driver for this. And what can we expect for the next quarters?
As the first time that I announced that we were entering in our digital platform, Uniclick, I always was very clear that in our pricing formula for Uniclick, which has a rate of around 35%, it has embedded a 12% NPL expectation on that business because of the nature of that business. So as long as it has been materializing the portfolio and growing at the rate that it has grown, we continue to have a very healthy NPL of 7.5% for this type of business. But that was included in the price. I mean just imagine the usual clients that are willing to pay 35% in rates for a loan. It's a pricing risk/reward formula.
Okay. I -- it's just because -- I get what you're saying, but the increase quarter-over-quarter was quite quick, and you have been growing this business at a very fast pace. So I wonder if you cannot pass this 12%, I think you mentioned, of the NPL ratio if you continue to grow at this rate, at the pace that you are.
No. I mean, actually, if you do a market comparison of these type of platforms between Uniclick or Konfio or this type of names, we are -- but from what we -- from the information that we have from competition, we are by far the best performing business in that.
Okay. Okay. And what about the leasing ratio? Can that one also increase in the quarter?
Well, I mean, it's the course of the business. I mean some quarters you improve, some quarters you deteriorate. I have always said that our threshold for NPLs is 5%. So we continue on a very healthy number on that. And that's also why we create more reserves in the quarter. I mean going with this prudent and in line with IFRS, that's why we created also more reserves, and those are shown in our P&L.
Okay. All right. And then perhaps last one then on -- you mentioned that part of the growth of the portfolio was due to FX. What is the percentage of [ overall ] portfolio that is in dollars?
Well, we have some -- well, not some -- an important number of clients that since their business -- and when we have said and explained our strategy of been targeting sectors and businesses that are within the supply chain to the U.S. and Canada, and I have said that many, many, many times, some of them request us to do the leasing in dollars because that's their currency for their respective businesses. And of course, that had an impact on the portfolio when you need to monetize or to evaluate that on pesos.
Okay. All right. And perhaps the last one now and I'll go back to -- and I'll leave the queue for other people. But on the CS, I think we really never got the details of the transaction. I believe you told me it was a 2024 maturity. But I don't think you disclosed more on that. And also, where is it in your balance sheet? Is -- I think 300 million is in the securitization, but I don't know where this 200 million is at this point is. I was expecting to see it in your debt, but I don't see it there.
Let me -- I will send you that information, showing you where it is stated in our financial statements.
All right. And any more details on this line?
No, that was not -- as I said, that was a private arrangement and we're not -- by contract, we cannot disclose.
Our next question comes from the line of Chelsea Colón with Aegon.
I just have a few follow-up questions. On the CS structure, the revolving portion, I think it was 200 million. Is that not recognized yet because you haven't drawn it? Or have you drawn it, such that it should be [ somewhere else now ]?
We have disposed of that facility, Chelsea. So it is -- that's why -- I mean we have -- [ it's signed ], but it is not disclosed in our statements because we have not disbursed on that facility.
So the 200 million is not disbursed, but the 300 million private securitization portion is?
Yes. Yes.
Okay. Got it. And that's what we're seeing as the new securitization due in 2024?
That's right.
Got it. Okay. And then regarding your plans to increase originations again over the collection rate, is that something that's already started or [indiscernible]?
No, no. In this, I will say, policies that we have for telling you and being very open to the market on everything that we are planning to do, that's something that we're going to start in the second half of the year. But as always had been the case for us, we are disclosing this -- you are aware that we are getting to a more aggressive position on originations.
Understood. And then on the asset quality side and the provisioning, I noticed that kind of for the first time, you started covering over 100% of the NPLs and other parts of your business -- in other parts of your business, while on the leasing side, the coverage ratio has come down. So what's the reason for this?
Well, under IFRS, for example, all the NPLs that we have on Uniclick or factoring on auto loans, need to be covered 100%. That's what the rule says. In leasing, since we have an asset that has a natural collateralization on the lease, the rules are different. And that's why you see that ratio on NPL coverage on leasing.
Right. But why did you start exceeding 100% in these other -- in Uniclick and in fact, some of the other parts of the business? Historically, you've done exactly 100%.
Now historically, yes. Under IFRS -- since we adopt the IFRS, we have covered that.
Right. I'm just wondering if there's like some sort of change in your methodology or process because I was just wondering why you're doing more than 100% now.
Let me double-check on that. I will get back to you on that question.
And then just my last question. On Uniclick, I know that you've pitched it in the past as having kind of a lower cost structure, like a lower customer acquisition cost. But it seems like in recent quarters, you're noting Uniclick as being a reason for your costs going up. So can you just help me understand that?
Yes. Basically, the main driver on that increase has to do with investments that we have carried out for enhancing all the operation at Uniclick, a lot of artificial intelligence features and of course, the headcount. Since it has increased very significantly the size of the business, I mean, I have also been hiring more talented people to run that business, and that's basically the effect that you see on that. Now getting back to the cost of acquisition, yes, Uniclick enhanced its cost of acquisition from 75,000, I believe, to 55,000. So it is moving in the right direction. And getting back on the cost, you are not going to see a further increase in cost for the rest of the year. Actually, we start 3 weeks ago a very aggressive cost reduction program across the board.
So at this point, you think you have enough personnel and like the technology in place to grow the business without investing meaningfully more.
Yes.
Okay. Understood.
Our next question is from the line of Ian Parkinson with Kite Lake Capital.
Good set of results. So congratulations on that. A couple of different topics. If I look at the outstanding on your dollar bond, it appears there's around 80 million that you repurchased. I'm just trying to reconcile that with the MXN 200 million gain, which should be around $10 million, to around 12% of the amount you retired, which seems small given where your debt has been trading. Can you help me understand that?
Yes. I mean it's just a matter of timing. Those -- that benefit, although it has already been record at the financial statements, I mean, legally speaking, it's in the process of canceling those bonds.
Sorry, I didn't quite understand that. So if you repurchased a bond at 0.70, then do you recognize the gain straightaway? Or there's a delay whilst you [ are in the formal ] process the canceling?
Yes. And so [ including ] that and reporting that, I mean, it's something that we need to go a process. That should be done in the next following days.
Okay. Because I was estimating if you repurchased [ 8 million ] of bonds and given that's been trading [ to a discount ] of around [ 40-points ], that should imply around the MXN 600 million gain. So I'm struggling to match that to the 200 million that we see here.
Yes. I mean we will follow up on that, Ian.
Okay. I guess, so next question is in terms of growing the book, I think the market doesn't want to see you shrink your loan book because I agree with you, that obviously destroys the business. I think people do want to see the book can be stable and the business perform kind of as expected. So I think it's a little bit -- I disagree with some of the comments earlier. But when your debt is trading at such a deep discount, I think in one of your prior calls, you had stated that you look at lending money to your clients versus buying back your own debt as being equivalent on, obviously, buying back your own debt as a yield and has no risk of losses. So why would you move to growing the book? I can completely understand the static book. But why would you grow the book when you could use the same cash in risk-free, extremely high yields to repurchase your debt?
We have done both, Ian. The fact -- and if you analyze the trading volumes in which our pricing has deteriorated, they are very low. So there is also not too much appetite for selling those bonds. But of course, it's part of our strategy. But of course, I mean, if I were to know that on our bonds -- if I announce a tender offer at 0.60, definitely, that will be my best guess to -- or the best thing to do. But for those folks that I have sat with, the largest bondholders, I mean, they are not willing to sell at those levels. And actually, that has been part of the discussions on a strategic level that we have had. Of course, I mean, if I have the willing people to sell those bonds, and I open the floor for every people who want to sell the bonds right now, I'm here available to repurchase them. But there is not so many volume out there to do that strategy.
Okay. And then the issuance [ of the local market partially ] guaranteed, so that's now scheduled for Q3. Is that something that you wanted to do tomorrow, all of the paperwork is ready to go, complete and this is just a case of timing it, just waiting until people are back from vacations and [indiscernible]? Is there outstanding documentation?
No. I mean it's a complex process because once that you finalized all the legal paperwork for the partial guarantee, the rating agencies who basically rate the local issuance need to run their own processes. And also, you have the effect that during this month of July and basically in August, not all the credit committees of their boards is -- have sessions because of the vacation period, and that's what -- it has also delayed the issuance. But we are confident that we are going to do that in the third quarter of this year.
Okay. So if you wanted to pull the trigger tomorrow, you could begin the process of getting these external parties to do their rating work. But from your perspective, if you have all of the paperwork done on the guarantee, everything ready, it just doesn't make sense to issue whilst lots of your purchasers will be off on holiday. Is that correct?
Yes. I mean as we speak, I mean, all the legal work is running as we speak.
And then on the drilling rig, obviously, it is a fantastic historic purchase. Have you -- I think you've mentioned that they -- you've had one approach, but the person who has approached you has not managed to raise the money to turn into a more concrete proposal. Have you formally engaged brokers to understand the number of likely bidders if you wanted to sell an asset like this, the time it takes to sell an asset like this? Are there any issues with the contract and the relationship with the operator that mean that you could not sell at the moment and you'd have to wait for some future point? Can you just give us a bit more detail on kind of the [ practical side on that ]?
Yes, we have not engaged brokers because -- I don't know how familiar you are with that market, but it's a very small market. So everybody knows everybody. And now having the rates of exploration for -- because of the oil prices are running off, we have received actually more unsolicited request for more information on the drill rig because there is some need out there for taking out the drill out of Mexico. But on that, I mean, of course, we need to figure out how to -- I mean, the operator needs to figure out how to break the contract that he has with Pemex. It's not an easy [ quest ]. So for us, the best option is that the operator [ buys it ] because we -- I mean, we -- it's a very clean and clear operation. But getting back to the point, I mean, we have not hired any broker because we are thinking of a direct sale if it's materialized.
But I guess, the issue is the operator here because I understand it's relative to the [ thinly ] capitalized entity, so it might struggle to raise the money. And it sounds like if you don't -- it sounds like it would be legally difficult to sell to somebody other than the operator at the moment. Is that accurate?
Well, it will depend, I mean, because there are some other operators that work with Pemex that are Mexican entities. I mean here, I mean, I will -- we can have a separate talk on this because I will need to enter into some, I will say, perception that the current administration in the government has other people that engage with Pemex and they're Mexican in nature. And so -- I mean, so forth, so on. But there are some other locals who are interested because, as I said, of the rating of the raise that right now are under negotiation with Pemex.
Okay. But if you had to make a guess, do you think that you'll still own this rig in 6 months' time?
That's a very good question. As I said, I mean, we are open, we're willing and we're interested in selling the rig. I mean as you said and you quote, it has been a fantastic purchase and a fantastic business based on the financial side. However, it does not comply with our future strategy and enhancements under ESG. So we are actively, let me put it this way, having conversation with the operator and with some other nationals who are interested in purchasing the drill. It's not a cheap asset. As I said, the valuations that we have from Pareto range from 225 million to 275 million. So it's not like selling a car. But we are under that strategy, and the people who deal with that in the company have my instruction of being very, very active on trying to sell the asset.
Okay. Cool. Well, that's all helpful. Again, good results. I think the [ consumer ] investors, myself included, tend to be [ with a lending ] business. If it has a static loan book, it's going to be stable because a growing loan book can always kind of disguise certain issues. So I know you're thinking about how quickly to resume the growth of the business, but I think we might need to see another quarter or so of stable book size and just how the business performs against that. And I can understand your frustration with how irrational the market is. But I think we would encourage you to see that as an opportunity rather than necessarily a problem.
The next question is from the line of Nick Dimitrov with Morgan Stanley.
I have a couple of questions. I just want to clarify something. The MXN 4 billion Cebures tranche that you're looking to launch recently, I know the last time we met, you were potentially looking to do that in August. Now you're saying because of the [ summer halt ], that might be pushed when -- do you think that that's going to be more of a September business now or even later than September? And the other thing that I want to clarify, because we're using the term that is guaranteed by NAFIN, is it really guaranteed by NAFIN? Or NAFIN will anchor the transaction by buying 20% to 25%, whatever the percentage is, rather than necessarily offering an explicit guarantee to a portion of the transaction?
No. The first question, no, we are not seeing that beyond September, for sure. In fact, we are targeting August. Now the way that -- NAFIN is not buying the paper. I mean they are providing a guarantee -- a partial guarantee that is embedded in the rating of the paper. So the rating improves because of these partial guarantees. And having that enhancement with the local ratings for that issuance is when you have more appetite and more [indiscernible] and pension funds come participate in acquiring the paper.
Got it. Got it. Yes, that was very important. And the other thing is I know last time when we spoke, you said that the transaction was just about to go through NAFIN's credit committee. I was wondering whether that was concluded successfully and...
That was concluded successfully.
Excellent. Okay. So do you have to do that every time? Because I know that your longer-term plans are to issue MXN 10 billion worth of longer-term Cebures. And does it mean that these new tranches, the MXN 4 billion later this year and the MXN 2 billion next year, will have to go through that same procedure, including NAFIN's credit committee?
No. The full procedure has already been done for, as I said, an amount of up to MXN 10 billion. We are now seeing appetite for -- on the first tranche that we think it's going to be very successful on MXN 4 billion. And basically, our plan calls for issuing something next year that will [ refund ] the bonds that are due in September of next year.
Okay. Okay. Got it. And just going back quickly to Uniclick. So you did mention NPLs picked up, and they did go up from 4.3% in the prior quarter to 7.5%. But I also noticed that your origination declined 15% quarter-over-quarter. Was that because you're looking to kind of fine-tune your score model so there was something else going on? Because [indiscernible]. Sorry, go ahead.
The pace that we also had on Uniclick was also in line with the prudent strategy that we decided to have based, as I said, on rating approach. And that's why you see that on quarter-over-quarter. And that's it. I mean it was just that.
Okay. Okay. And if you look at the risk-adjusted profitability of Uniclick, right, and when I say risk-adjusted, let's assume that the risk is 12%, the ones that you kind of factored into the pricing of that product, and you compare it to the leasing product, how much more profitable is Uniclick versus the leasing product, again, on a risk-adjusted basis? I don't have the numbers to do the calculations and the comparison.
I will get back to you on that because I need to do the calculation as well.
Okay. Okay. And just one clarification, last question. The loss on the sale of lease assets, these are basically assets that have been taken over. It's collateral that is being monetized, and it's being sold at market rates that are below where it was booked, as a result of which there are losses, right? I mean that's my interpretation. I just want to make sure that that's the right one.
That may be the case. Let me just also analyze that, and I will get back to you on those 2 questions.
The next question is from the line of Bernardo González with Sura Investment Management.
Can you hear me?
Hi, Bernardo.
This is Bernardo González from Sura Investment Management. Just one quick question regarding [indiscernible] placement that you have talked about in the past of around 175 million, that you told us that it could be [ equitable ] at the end of this year. Have you -- has there been some progress regarding that?
Yes. There have been. Actually, in the first week of August, these guys are going to be here in our corporate headquarters to have a, I would say, a due diligence with senior management. And yes, that continues on the plans of the company for funding. But we are seeing that by the end of the year.
Okay. Perfect. And the other question is, I mean, I know that there had been some questions regarding the Crédit Suisse facility. Just to make sure, how much have you disposed from this facility?
300 million.
300 million. Okay. And all of this was used for debt refinancing?
It was used for corporate purposes. Of course, it has a significant portion on debt. And also, part of it was also used for repurchasing some of the bonds.
Okay. The 200 million that you have been taking, right?
No. There are MXN 200 million that were recorded in the financial statements, and that's it. I mean that's what I can tell you.
Our next question is from the line of Sam Epee-Bounya with Wellington Management.
Sergio, maybe to go back to a couple of things you mentioned, like the fact that you will resume growing your origination despite investors' concern. I think for my part, and we discussed this before, some of us still question the cash flow generation capacity of UNIFIN. So I think it would be helpful as an example -- I don't know if you can answer on this call, but I think about your cash position of MXN 5.3 billion that you disclosed at the end of 2Q -- 1Q sorry -- 2Q now. And that's in the context of having improved origination by 6.8%, if I'm not mistaken, and sort of slowed down origination by 28%.
So origination went down by 28%. Collection improved by 6.8%. And then you did some financing in the quarter and still cash looks okay, but I expected cash to be higher. So can you explain a bit, one, the cash position, why not higher? And then two, maybe there are some other items that I've missed. And three, how -- [indiscernible] you to this resumption of growth in the loan book, because I think that's going to be, as you imagine, not going to be well received?
Sam, we have met over the year perhaps 5 to 6 times, and I have heard all of your concerns. And as I said the last time that we met in Miami, I believe, I have a business to run. Increasing 22% of my cash position quarter-over-quarter, I mean, I think it's a great number that I will not expect to be highly appreciated by you guys. But once again, if you are pushing me to continue with this strategy, I mean, the business is not going to be sufficient for everything that we need to do. I'm just telling that we're going to get back to be more aggressive on originations, but we are running the analysis to have a healthy base on originations. We are going through that as we speak. Of course, I'm not saying that I'm going to get crazy and start to be very, very, very aggressive. I mean it's going to be something well and strategically think -- I mean, thought and that's it. That's what I can disclose right now.
Okay. Maybe, Sergio, what can be helpful just on the cash, I recognize the sequential improvement. I'm saying when you think about the year-over-year, it's still flat despite sort of the...
If you remember [indiscernible]...
Go ahead.
You need to remember that on the first quarter of last year, we did a debt issuance. I think that was our last bond issuance in the market. So that has, of course, an effect.
And in terms of the -- so you've answered the question about the growth. I think we just view things differently. I don't think we're going to solve this on this call. But maybe last question for me would be on the equity raise. You haven't talked about this. I imagine that's no longer a priority.
That's not a priority as we speak. We do not see the need for doing that. And of course, we do not see the -- talking to my shareholders, having a dilution at the current price of the shares, I mean, it's out of the table. That's what I said at the beginning of the call that I have different stakeholders out there. I have banks. I have you guys. I have [indiscernible] and pension funds here in Mexico. And of course, also, I have shareholders. And I need to be very, very prudent in trying to satisfy all of you guys.
And last question, Sergio, will be sort of on the maturity you have in September of next year per Bloomberg and what you've shown, about $318 million of that 7 1/4 due September 2023, what's the plan? I mean you've done some of those -- you renewed some of your credit facility, but we haven't seen yet the Cebures that you talked about. So I just want to get a sense of how you prioritize kind of that maturity and how you plan on addressing it.
Yes, no, the plan, as I said, I mean, has to do with the issuance of Cebures in August and then another tranche in the first quarter of next year to somehow [ have the money to ] and perform the maturity that we will have on September of 2023. In addition to that, as I said, we have also -- we are also working with some private placements. And similar to what happened or what we show with the Crédit Suisse facility, I mean, we have term sheets that are in line with this type of transaction. So I mean, we will be very, very, very prudent in handling the maturities that we have ahead of.
Our next question is from the line of Mark Rieder with GIC.
Sergio, I'm wondering if you could give us a little bit of outlook on your vision of how the business evolves over the next year or 2 and just how you see things trending, what you see the business looking like. And I ask that in the context of the fact that the stock is still at MXN 16. Some of the bonds are trading at 0.50. I mean how do you get the prices of the stock, the bonds back up? How do you see the business sort of evolving and in particular, maybe during what could potentially be a recessionary environment?
Yes, we have that in mind, Mark. We're trying to be as prudent as we can be based on the possibility of a recession next year and thinking about a broader concept of the strategy and the view that we have. We're going to start on a political -- in fact, on political, move very aggressive in the country, having rising rates basically everywhere in the world. And that's why we're thinking of being very prudent on the risk appetite, but also to have back on track the originations as long as we can be because of, I would say, a difficult environment that we're going to be facing next year.
Okay. And how do you see yourselves getting the stock price back up? I mean you're trading well below book, and we see the bond prices. What is the thought of how to continue to improve that?
Yes, and that's basically part of my answer on originations. I mean, of course, the shareholder, they look for profitability, look for growth. And at these levels, of course, and being show in 2 quarters of extremely prudent moves is not what they like to hear. I think that ones that we are balancing the funding side, the stock is going to start to react positively. And of course, we are very close to our shareholders, to show them the potential and the fundamentals and so forth and so on. And that's also part of the strategy.
Okay. And how much additional liquidity do you need? Can you talk about beyond what maybe the market knows about in terms of what the opportunity sets are to continue to make sure that you have more than adequate liquidity?
We have that. I mean we have more than adequate. I will say that the more liquidity that we get will be used if we find the volume to repurchase debt. I mean, as I said, the best business that we have right now is to repurchase bonds that are trading at 0.50 to 0.60. But that's a dynamic game. At the end, it has to do with different factors, different perceptions. And let's see how Crédito Real end because -- if it continues to make a lot of noise particularly with the bonds and with some financial institutions and of course, that volatility that we have seen in the last weeks with, as I have just said, I mean, the risk of a recession and the noise of the U.S. coupled with the political noise that Mexico has with -- what AMLO has with President Biden and many, many moving parts out there. So what I can tell you is that we are taking -- we're behaving as professional as we can be.
Okay. And how do you keep the agencies happy if you keep on using the excess liquidity to buy back debt?
Because at the end, when they see the -- and when you see the broader picture, I mean, our leverage is going to be decreasing if we continue with that trend. So that's also another thing that they are very -- that we're taking a very close look to those numbers and that strategy. And I think that a game changer for the bond market is going to be the local issuance and proving the market that we have the depth, the tenor for issuing locally.
Okay. And then, sorry, just I know you talked a little bit about this earlier, but just to make sure I understand correctly. Is there anything -- any developments on asset sales or thoughts there or how that also factors into your future views on having enough liquidity, pleasing the agencies and yet being able to grow the originations?
Yes. If you're referring to our [ drill ], like the strategy there, as I said, I mean, continues to be very active in pursuing an opportunity for selling that asset. As I said, it does not comply with our ESG efforts. And selling that asset at the valuation that we have will be, I would say, our best financial operation ever because the cost of purchase that we had, and it has been a very, very good business. However, it's part of our strategy to sell that asset.
Okay. And then you've talked about monetizing other assets in the past maybe, right?
Yes. I mean everything that -- we have a dedicated team that is looking to monetize any assets that we can. But I think that the biggest one and the most important and the one that is under the loop of almost everyone is the drill.
The next question is from the line of Ian McCall with First Geneva Capital.
Some of my questions have already been answered. One question about liquidity at the moment to support buybacks, just to draw a finer point on that. Do you have the liquidity right now to continue with the buybacks?
Yes. But once again, we -- I mean, the pressure that we have from rating agencies that the share buyback program, of course, was against their view. And we were very respectful and very careful on trying to follow all the single request that the rating agencies had on us. So unless we do not show that we can, let's say, either access the local markets or sign a new facility in the upcoming months, I mean, it's going to be very difficult, and we need to be very prudent on share buybacks.
The next question is from the line of Simón Fuenzalida with Moneda.
Sergio, can you explain to me why the financial debt increased year-over-year 14%, but your interest expense decreased 6%? Even if you add back this gain, the increase would be around 4%.
Yes, it has to do with different factors. As I said, I mean, there is an increase in the value -- or in the size of the portfolio because of FX. That does not necessarily have a direct impact on the interest income. The other thing, as I said, it has to do also with an increase on NPL. And third, as I said, the increase in originations for this quarter was made on the last 15 days of the quarter. That, of course, has not recorded any interest income in the numbers.
Sorry, this was regarding interest expense. The financial debt increased 14%, but the interest expense decreased around 6%...
Okay. No, that's because of the effect on the repurchase of the bond. As we said, it accounted for 200 million.
Correct. But without taking that effect, the increase would be around 4% interest expense.
It has to do with interest rates and of course, the depreciation of the peso.
Yes. But I would expect that the interest expense would be much higher given that you have [indiscernible] proportion on [indiscernible]. And this year, it went up, and you have [ a little bit ] higher amount of debt.
Yes, Simon, if you consider our funding cost increase from the first quarter, from 10.5%, to the second quarter, 11%, so yes, you're correct. The cost of interest would have been higher if we hadn't repurchased our own bonds.
Okay. But the increase was very small. For me, it doesn't add up.
We will get back with that reconciliation to you, Simón.
Our final question is from Gilberto Garcia with Barclays.
I had a follow-up on the 200 million gains. I'm not sure if I understood correctly that -- you said that you might recognize further gains on this specific repurchase once you [ illegally ] canceled these bonds?
No, we are not going to recognize any -- I mean, unless we do some additional buybacks, that's the effect that we recognize.
Okay. And so just trying to better understand the magnitude of the gains. In my calculation, you bought back something like $80 million in bonds. Is that correct?
Correct. That's correct.
And so did you pay $70 million so that $10 million difference is a MXN 200 million gain? Or are there -- is it not just that simple to calculate that gain?
No. I mean that's the effect in the P&L. We are not disclosing the levels that we repurchased the bonds.
Okay. Understood. And thinking about the level of the CS funding, how do you think about funding a TIIE plus 5.5 facility against buying back debt on the secondary market? Your gains are -- I guess, they are significant. But with that level of cost of funding, does that leave you enough room to continue to pursue this?
Yes.
The last question comes from Martin Lara with Miranda Global.
How do you see the portfolio yield and the OpEx in the second half of the year?
You're going to see an improvement in OpEx, for sure. As I said, we started 3 weeks ago for a very aggressive cost reduction program. We do not need to increase furthermore our investments at the Uniclick level. So you're going to see an improvement in both things.
I'll now turn the floor back to management for closing remarks.
Well, thank you, again, for being here with us. As always, our IR team will be available for any further questions. Thank you very much, and have a good weekend. Bye.
This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.