This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com. On 14 April 2022, Scope downgraded Optimum Solar Zrt.’s issuer rating to C/Negative and the senior unsecured debt rating to C.

Since then, Optimum Solar has been negotiating with bondholders to waive the accelerated repayment clause. The clause requires Optimum Solar to repay the nominal amount (HUF 6bn) within 10 business days after the bond rating falls below a B-. On 3 May 2022, the company announced that a standstill agreement was reached to waive the clause, valid until 30 June 2022.

The standstill agreement requires the company to fulfill the following conditions: i) the bond interest payment (HUF 210m; due on 14 May 2022) has to be placed in an escrow account until 2 May 2022 (executed); ii) expected operating expenses for Q2 2022 have to be paid into an escrow account until 16 May 2022; iii) audit firm Ernst & Young has to be appointed as restructuring advisor by bondholders (executed), with Optimum Solar to cover the costs; iv) sister company Lugos Renewables Kft. has to guarantee the bond along with Optimum Solar by 31 May 2022; v) Optimum Solar must nominate a Big Four auditor apart from Ernst & Young; and vi) Optimum Solar must provide monthly business and financial reports to bondholders and Scope throughout 2022 (which the bondholders can modify to a quarterly frequency from 2023).

Ernst & Young has until 15 June 2022 to assess the business and propose a restructuring/going concern plan to bondholders. Bondholders have until 30 June 2022 to approve that plan and potentially prolong the standstill agreement.

The standstill agreement would be withdrawn, resulting in accelerated bond repayment, in the event of i) a breach of any condition in the standstill agreement (mentioned above) or the bond documentation; or ii) the initiation of any legal proceeding, especially on insolvency or banktruptcy.

Scope Ratings holds the opinion that the standstill agreement protects the rights of the bondholders, has been chosen freely by them, and from now until 30 June 2022 does not put them in a financially adverse position compared to their initial investment. Given that Optimum Solar is still upholding its interest payment obligations, Scope’s negative rating-change driver has not been triggered. Scope will continue to monitor the developments.