Vasútvill intends to issue a HUF 3bn senior unsecured corporate bond under the Hungarian National Bank’s Bond Funding for Growth Scheme in Q1 2021. In the summer of 2020, the company announced the issuance of a HUF 8bn bond to finance its expansion plans via acquisition of smaller players (HUF 5bn) and also to finance net working capital (HUF 3bn). Vasútvill has reviewed its business plan, and now aims to issue a HUF 3bn bond to finance future working capital requirements. Although potential expansion remains part of Vasútvill’s business plan, the company intends to finance it using internal resources for the time being.

Scope Ratings incorporated the assumption of a HUF 8bn bond volume into its base case but believes that the updated bond volume represents no material change to the current rating case. It does not impact the issuer’s business risk profile and only negligibly changes the metrics used to determine the financial risk profile. This is mainly because Scope had assumed the acquisitions would be made outside of its base case scenario, with bond proceeds initially maintained in temporary risk-free securities and thus not affecting the company’s net leverage.

The bond conditions remain unchanged, including amortisation of 20% yearly from 2026 until maturity, a fixed annual coupon and a 10-year tenor.

The recovery calculation for the initial BB- senior unsecured debt rating in July 2020 included the envisaged bond. The decrease in the issuance volume is offset by the decrease in the amount of securities – cash equivalent – held by the company. Therefore, Scope’s rating case for senior unsecured debt also remains intact.

This publication does not constitute a credit rating action. Scope assigned a first-time rating of BB- to Vasútvill Kft. on 7 July 2020. For the official credit rating action release click here.