The latest information on the rating, including rating reports and related methodologies, is available via this LINK.

Rating action

Scope places TV2’s BB-/Stable issuer rating and B+ rating for senior unsecured debt under review for a possible downgrade. The review status will be resolved within a few weeks and in six months at the latest.

Rating rationale

Scope has received information on a new investment strategy that could impact profitability going forward and consequently adversely affect the financial risk profile. The agency has uncertainties around the nature and amortisation of these new investments. Scope is seeking to resolve this issue as soon as possible, incorporating additional information on the nature of these new investments and their impact on credit metrics.

TV2’s current issuer rating (BB-) is largely supported by the group’s leading position in Hungary as a television broadcaster. TV2 has become the country’s primary audio-visual company, thanks to a material expansion of its channel offer, combined with a surge in its audience ratings that has allowed it to overtake main competitor RTL and increase advertising revenues. In 2018, TV2’s market share in the spot advertising segment stood at 37%, generating HUF 20.0bn in a concentrated market. Scope views positively the ongoing cost control policy, which has allowed the company to attain strong operating profitability of above 30%. The company’s creditworthiness is further supported by adequate liquidity, low leverage and good cash flow generation.

The rating is constrained by the limited overall size of the market in which TV2 operates. The group also has concentration issues regarding its footprint and customer portfolio (especially in its distribution segment). Scope views negatively TV2’s volatile profitability, due to its sensitivity to recurring negotiations with content producers and the reduced visibility on future advertising revenues. TV2’s digital offering and monetisation remain limited, although the group expects to develop its online platform in the foreseeable future. Finally, the rating reflects the negative credit impact of TV2’s financial policy as the company is expected to double its gross debt while refinancing a shareholder loan via an unsecured senior bond.

Rating-change drivers

Scope does not expect a positive rating action based on the current information provided by the issuer.

A negative rating action could be possible if the agency would expect Scope-adjusted/EBITDA to rise above 2x on a sustained basis for the next few years.

Stress testing & cash flow analysis
No stress testing was performed. Scope performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for this rating(s) and/or rating outlook(s) (Corporate Rating Methodology) are available on www.scoperatings.com.
Historical default rates of the entities rated by Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s definitions of default and rating notations can be found at https://www.scoperatings.com/#governance-and-policies/rating-scale.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The rating was not requested by the rated entity or its agents. The rated entity and/or its agents participated in the rating process. Scope had access to accounts, management and/or other relevant internal documents for the rated entity or related third party.The following substantially material sources of information were used to prepare the credit rating: public domain, the rated entity, the rated entities’ agents, third parties and Scope internal sources. Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Regulatory disclosures
This credit rating and/or rating outlook is issued by Scope Ratings GmbH.
Lead analyst Thomas Langlet, Senior Analyst
Person responsible for approval of the rating: Thomas Faeh, Executive Director
The ratings/outlooks were first released by Scope on 29 November 2019.

Potential conflicts
Please see www.scoperatings.com for a list of potential conflicts of interest related to the issuance of credit ratings. 

Conditions of use / exclusion of liability
© 2019 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

Scope Ratings GmbH, Lennéstraße 5, 10785 Berlin, District Court for Berlin (Charlottenburg) HRB 192993 B, Managing Director: Guillaume Jolivet and Torsten Hinrichs