Mexican Shadow Banks Proving a Pandora’s Box for Bond Investors

Bond investors are concerned there might be something rotten in Mexico’s shadow banking business.

The price of bonds from Alpha Holding SA and Credito Real SAB de CV tumbled after each announced revisions to financial statements in recent days, with debt from other borrowers in the sector, such as Financiera Independencia SAB de CV and Unifin Financiera SAB de CV, also taking a hit as investors wonder about the quality of loan portfolios and the risk of contagion.

“Once you open up Pandora’s box, you don’t know what’s going to come out,” said Luis Maizel, co-founder of LM ...