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

Rating action

Scope Ratings GmbH (Scope) has placed the BB+ issuer rating of Hungarian utility ALTEO Energiaszolgáltató Nyrt (‘ALTEO’) and its S-3 short-term debt rating under review for a possible upgrade. The BBB- long-term senior unsecured debt rating has not been placed under review.

Rating rationale

The takeover – as announced by a press release on 17 December 2022¹ – could positively affect ALTEO’s credit rating. The leading party in the transaction, MOL RES Investments Ltd, is solely owned and controlled by Hungarian oil and gas incumbent MOL Group, which is rated higher than ALTEO (Scope’s rating on MOL MAGYAR OLAJES GAZIPARI NYRT is available to ScopeOne subscribers). The higher credit rating on MOL Group benefits from its significantly stronger business outreach and financial strength. While Scope acknowledges that MOL Group via its subsidiary MOL RES Investments Ltd would hold only one-third of ALTEO’s share capital under the transaction, it would likely have factual control over ALTEO. Such control would likely result in a harmonisation of the ratings between the ultimate controlling shareholder and ALTEO.

MOL RES Investments Ltd signed a shareholder agreement on 16 December 2022 and an agreement to act in concert with Főnix Private Equity Fund and Riverland Private Equity Fund to fully acquire ALTEO. The three parties first acquire a 9.99% stake in ALTEO from current majority owner Wallis Asset Management Zrt. In a second and third step, the parties intend to acquire the remaining 51.567% stake from Wallis Asset Management Zrt and launch a mandatory public takeover bid for the remaining shares, led by MOL RES Investments Ltd. Upon completion, the three parties would eventually have an equal stake in ALTEO. The completion of steps 2 and 3 are subject to obtaining approvals from the National Bank of Hungary in relation to the mandatory public offer, and the Hungarian Energy and Public Utility Regulatory Authority as well as the Competition Authority.

Under review for a possible upgrade

The issuer rating is under review for a possible upgrade. Scope will closely follow developments related to the envisaged transaction. An upgrade could be triggered by the finalisation of a full takeover of ALTEO and the exertion of factual control of MOL Group over ALTEO’s activities.

Scope could confirm the rating if the transaction was cancelled or if ALTEO retained its operational and financial independence after full or partial takeover.

Long-term and short-term debt ratings

The S-3 short-term debt rating has been placed under review, driven by the under-review status of the underlying issuer rating.

The BBB- long-term debt rating for senior unsecured debt issued by ALTEO is not affected by the under-review placement of the issuer rating.

Rating driver references
1. MOL GROUP TO PURCHASE OWNERSHIP STAKE IN ALTEO PLC.

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

Methodology
The methodologies used for these Credit Ratings and/or Outlooks, (General Corporate Rating Methodology, 15 July 2022; European Utilities Rating Methodology, 17 March 2022; European Utilities: Renewable Energy Rating Methodology, 17 January 2022), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. 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 Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With the Rated Entity or Related Third Party participation    YES
With access to internal documents                                        YES
With access to management                                                  YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting the Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Sebastian Zank, Managing Director
Person responsible for approval of the Credit Ratings: Olaf Tölke, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 7 August 2019. The Credit Ratings/Outlooks were last updated on 4 October 2022.

Potential conflicts
See www.scoperatings.com under Governance & Policies/EU Regulation/Disclosures for a list of potential conflicts of interest related to the issuance of Credit Ratings.

Conditions of use/exclusion of liability
© 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis 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.