Following the announced acquisition of the ISS facility management subsidiaries in Central Eastern Europe (CEE) back in March 31st, 2021, B+N plans to issue a new senior unsecured bond to partly finance the acquisition.

The new bond which is intended to be placed under the Hungarian Central Bank’s Bond Funding for Growth Scheme (MNB scheme), will be of a volume of HUF 12bn. The new bond is proposed to have a maturity of ten years, a fixed annual coupon with linear amortization starting in 2023 until maturity. The company’s intended uses of the bond proceeds are for the financing of the international acquisition.

Scope Ratings already incorporated the assumption of a HUF 12bn new outstanding bond volume into its base case.

B+N’s business risk profile will benefit from the established market positions of the ISS subsidiaries. The acquisitions will ensure an immediate foothold in the CEE region and improve B+N’s competitiveness in western Europe, beyond its current market leadership in Hungary. This transaction not only creates growth opportunities but also reduces the concentration on Hungary, supporting geographical diversification and reducing dependence on Hungarian state procurement contracts.

The potential positive impact on the financial risk profile would mainly stem from higher cash flow generation providing direct synergies. Thus, the new bond issuance will not negatively affect the credit metrics which improved significantly back in 2020 due to increasing service demand and a large public procurement contract won.

Overall, the rating case for B+N Referencia Zrt’s B+/under review for possible upgrade issuer rating remains unchanged.

The rating case for senior unsecured debt also remains intact (B+/under review for possible upgrade) as Scope’s forecast assumed a successful placement in H1 2021 of the 12bn senior unsecured bond which will bring the total issuance volume to HUF 22bn under the Bond Funding for Growth Scheme.