(Bloomberg) -- It took just over two hours for the dollar bonds of Paraguay’s largest meatpacker to lose a third of their value after a report by a Wall Street analyst raised questions about the company’s finances.

Since then, Frigorifico Concepcion SA has held meetings with bondholders to alleviate concerns over PricewaterhouseCoopers LLP’s so-called qualified audit opinion, which flagged issues around the lack of access to key financials, board member Jorge Usandivaras said.

The bonds jumped 6 cents on Wednesday to around 66 cents on the dollar, according to Trace data. Still, they are far below the 88 cents they traded for prior to the Seaport Global Holdings LLC report.

“The clean opinion is already priced in,” Seaport analyst Bevan Rosenbloom wrote in a note Wednesday. The bond’s underperformance “has more to do with an altered perception of the correct FRICON risk premium,” he wrote, referring to the meatpacker.

Investors are now turning to first-quarter results and an earnings call scheduled for Thursday. 

Strong Reaction

The strong investor reaction after the audit concerns arose is “indicative of the skittishness of investors following a couple years of credit blow-ups, especially regarding accounting uncertainties,” said Roger Horn, a credit analyst at Mariva Capital Markets.

Last week, Fitch Ratings downgraded Concepcion’s ratings to B from B+, citing the company’s “lack of financial transparency and weakened governance.” The firm also placed the company on rating watch negative.

Auditing mishaps in Latin America in recent years have left money managers entangled in lengthy legal battles with little left to recover. Most bonds from Mexican shadow banks, which defaulted en masse in the past three years, trade for pennies on the dollar. 

Meanwhile, investors are still grappling with the fallout from the bankruptcy of Brazilian retail giant Americanas SA after a $5 billion fraud revealed in early 2023.

Read more: Mexico’s Shadow Bank Collapse Wipes Out $5 Billion for Investors

“There should not be any concern about accounting policies” at Concepcion, Usandivaras said. The slide in the company’s dollar bonds shouldn’t derail plans to raise capital later this year or in 2025, he added.

Missing Opening Balances 

Asuncion-based Concepcion last year hired PwC as its auditor as it prepares an initial public offering. In a report published at the end of April, PwC noted it didn’t have the opening balances of BMG Foods Importacao e Exportacao Ltda., a Concepcion subsidiary, as of Dec. 31, 2022.

In the qualified opinion — which generally indicates the auditor considers a company’s financials as fairly presented, with the exception of a specific area — PwC said those limitations affect about 32% of Concepcion’s total revenues and about a quarter of its operating cash flows for 2023.

Concepcion this week restated its 2022 financial results, correcting its cash balance to $3.96 million by the end of that year — down to about a tenth of the $33.7 million listed in the original set of financials, according to a company release. The restated results were audited by Benitez Codas y Asociados, the company’s former auditor, which declined to comment. 

The discrepancy was pointed out in a note last week by Alexis Panton, a credit analyst at BNP Paribas, who first warned about inconsistencies on the balance sheets of some Mexican shadow banks.

The firm’s audit also highlighted about $239 million of outstanding receivables from Nostro Beef and Betampex Comercio Exportacao e Importacao Ltda., two Brazilian companies. PwC said the consolidated statements didn’t include adjustments in case the two companies were not able to comply with their financial commitments.

The note by Seaport that spurred the selloff this month questioned Concepcion’s relationship with these two companies. Usandivaras said the meatpacker’s IT department is made up of freelancers and it is “preposterous” to make accusations of control or fraud. Seaport didn’t immediately respond to a request for comment.

“When it comes to fraud allegations, the best is to look from the sidelines,” said Alpha Credit Advisors Ltd. partner Cesar Fernandez. “Now credit markets are super hot, but when the financial stress begins, those things can’t be hidden.”

--With assistance from Ken Parks.

(Updates bond pricing in third paragraph.)

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