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

Rating action

Scope Ratings GmbH (Scope) has today withdrawn Optimum Solar Zrt.’s issuer rating as well as the company’s senior unsecured debt rating for lack of sufficient information. Scope has not been able to verify the correct rating level before withdrawal. 

Rating rationale

Due to unreliable, insufficient and inaccurate information, as well as the misuse of funds, the agency is not able to uphold its ratings on Optimum Solar and thereby withdraws them. The agency has also observed a breach of the company’s standstill agreement with creditors related to putting aside the debt service due on 14th May 2023 to an escrow account by 4h May 2023 which points to an imminent non-payment related default risk.

In August 2022, Optimum Solar had agreed on a more permanent restructuring business plan, after receiving an initial temporary standstill agreement upon a rating deterioration to ‘C’ in April 2022. Based on the permanent restructuring plan, creditors have waived the accelerated repayment clause on the principal amount of Optimum Solar’s bond as long as the milestones under the restructuring plan are fulfilled in essence and on time.

On 04.05.2023 Optimum Solar was supposed to pay a HUF 210m bond coupon and a HUF 300m bond amortisation to an escrow account, a milestone under its restructuring business plan. The company failed to do so and did not inform Scope or the investors about its non-payment. The agency double checked on the 04.05.2023 that such payment had been made and was informed by investors that it had not been. According to information provided by Optimum Solar, Mr Roland Lugos (CEO and owner of Optimum Solar) had paid in HUF 795m on 21.03.2023 to fulfil a (delayed) milestone related to misuse of funds under the restructuring plan and MVM (Hungarian State Electricity Co.) was invoiced HUF 2.5bn in relation to a new solar power plant construction up until end-March and payments were received. However, the funds received were not set aside for debt service, but instead used to pay suppliers and buy new solar panels (something Scope is not able to verify). Optimum Solar cited a ‘vis major’ event delaying the invoicing of the only current ongoing project with MVM as the reason for missing the payment milestone. To Scope’s knowledge, the ‘vis major’ event’s impact is negligible and does not explain why the company was unable to fulfil the payment milestone in light of recent significant cash inflows.

Over the course of the last months, Scope has received information from Optimum Solar, which in light of the recently learned facts has shown itself to be non-reliable, insufficient and inaccurate while important credit-relevant information was withheld from the agency (i.e. the ‘vis major’ event and the consequence of an upcoming non-payment event constituting a breach of the standstill agreement being known on 25.04.2023 or even before). This demonstrates that governance and transparency has not improved in Scope’s view (ESG-factor: credit negative).

Given the above, Scope is unable to verify the ratings at the appropriate level due to a lack of sufficient information, a prerequisite for a credit rating, and therefore withdraws the ratings.

With the breach of the conditions and milestones defined in the rating remedy business plan and the standstill annex agreement, the grace period as defined in such remedy plan automatically ends and the bondholders can execute their rights to debt acceleration. Scope does not have information about the potential reaction of bondholders to the current breach, which could result in a termination of the waiver and trigger an accelerated repayment of the nominal bond amount within 10 working days. Such a scenario is therefore likely to result in a default situation.

One or more key drivers of the credit rating action are considered an ESG factor.

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; Construction and Construction Materials Rating Methodology, 25 January 2023), 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, the Rated Entities' Related Third Parties, third parties and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be unsatisfactory. 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: Thomas Faeh, Executive Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Executive Director
The Credit Ratings/Outlook were first released by Scope Ratings on 4 February 2020. The Credit Ratings/Outlook were last updated on 28 September 2022.

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

Conditions of use/exclusion of liability
© 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund 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.