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Rating action

Scope Ratings GmbH (Scope) has today affirmed Germany-based BLS Beteiligungs GmbH’s (hereafter BLS) BB+/Stable issuer rating. Concurrently, Scope has withdrawn the BB+ senior secured debt rating due to business reasons.

The affirmation is based on the issuer's continued strong growth without significant deterioration in credit metrics.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BB (unchanged). BLS's business risk profile is driven by its position as the second largest bike leasing platform in Germany and its very strong operating profitability.

Despite being a relatively young company, BLS is already the second largest bike leasing platform in Germany as a result of rapid growth over the last two years. In 2023, revenues increased by 37% YoY to EUR 146.2m, while the CAGR for the period 2020-23 was over 50%. Scope attributes this growth to two factors: i) a unique business model offering a full service including insurance for employees and employers as well as bicycle maintenance; and ii) favourable demand trends resulting from regulatory and fiscal conditions such as tax and employer benefits as well as increased environmental and health focus among customers.

In 2023, BLS will have facilitated more than 150,000 bicycle leasing contracts. Scope estimates BLS's market share in Germany to be around 25%, based on its customer structure of more than 60,000 corporate customers with 3.2 million employees. This is significant given that the company was only founded in 2015. Nevertheless, Jobrad remains by far the market leader in Germany with a market share of around 40%.

Diversification remains the weak spot in BLS's competitive assessment. While BLS's customer diversification and exposure to specialist bicycle retailers (around 6,500) is positive, it is focused on only one segment and two countries (Germany and Austria). The underlying markets, while large, are becoming increasingly competitive as new players emerge with similar or even more flexible solutions. However, significant medium-term cash flow generation from non-bike-related services (Probonio platform) is expected to improve diversification.

BLS's Scope-adjusted EBITDA margin* is high for a business services company, at around 40% in 2022-23, which Scope expects the company to maintain in 2024-25. Return on capital employed is moderate (16% in 2023, down 10pp YoY) due to the asset-light nature of the business (operating as a platform).

Financial risk profile: A- (revised from A). BLS's financial risk profile is characterised by very low financial leverage, as evidenced by a Debt/EBITDA of less than 1x, and strong cash generation. The business can operate with limited debt due to its asset-light nature as an agent/broker with no manufacturing or product exposure and moderate seasonal working capital requirements.

BLS does not require, and has no plans to raise, significant new non-leasing financing. As a result, Scope expects Debt/EBITDA to remain at around 1x in 2024-25 (2023: 0.8x, up 0.1x YoY). FFO/debt* is strong (2023: 93%, down 27pp YoY) and is expected to remain strong (above 50%) due to the commission/platform nature of the business.

EBITDA interest cover is strong at almost 10x at the end of 2023 and Scope expects it to remain at 5-6x in 2024-25. The main driver of the reduced interest cover is a gradual increase in the effective interest rate to 6.0% in 2025 from 3.0% in 2023, which is only partially mitigated by growing EBITDA and low leverage.

Given BLS's non-capital-intensive nature as a service provider, there are no major capex requirements (other than for software and office equipment).

Significant positive FOCF is expected to be generated mainly from the early receipt of cash from the forfaiting / securitisation of receivables and the upfront receipt of full insurance premiums from customers.

Liquidity: adequate. Short-term debt at the end of 2023 consists of (i) a EUR 10m of registered bond maturing in May 2024, which was repaid from the proceeds of a EUR 15m registered bond issued in May 2024 and (ii) a EUR 25m registered bond maturing in December 2025, as well as (iii) EUR 10m in lease liabilities. The financing needs in a rapidly expanding environment can be effectively met through a combination of increasing free cash generation and refinancing via forfaiting, bank loans and asset-backed securities transactions. The other liabilities reported on the balance sheet reflect the refinancing of lease receivables and are covered by lease receivables. Scope expects that BLS will be able to maintain liquidity in the future through short-term funding measures in line with an increasing business.

The Issuer is subject to financial covenants in respect of its Namensschuldverschreibungen. These include: (i) maintaining the issuer rating at or above BB+ (cure period to restore the rating to BB+ of 9 months; immediate repayment required if the issuer rating falls below BB-) and (ii) Debt/EBITDA below 2.0x (immediate repayment). The issuer was in compliance with its covenants in 2023 and Q1 2024 and, based on Scope's forecasts, there is moderate headroom to the financial covenant going forward.

Supplementary rating drivers: credit-neutral. Supplementary rating factors have no impact on the issuer rating.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that that BLS’ balance sheet will continue to reflect small amounts of financial debt and its ability to finance significant growth without jeopardising credit metrics.

The upside scenario for the ratings and Outlook is seen as remote, but would require:

• The successful execution of growth plans and no emergence of additional competitors. It could also be supported by improved diversification through BLS’ expansion into other leasing products.

The downside scenario for the ratings and Outlook is:

• Debt/EBITDA exceeding 2.5x on a sustained basis.

Debt rating

Scope has withdrawn the senior secured debt rating of BB+ due to early repayment in 2023 of a 7-year EUR 30m senior secured loan facility contracted in 2021. The withdrawal of the rating and the cessation of analytical coverage are due to business reasons.

The withdrawal was not preceded by a Credit Rating Action, as Scope considers the rating to be at the correct level prior to withdrawal.

Environmental, social and governance (ESG) factors

BLS promotes the use of bikes via its platform, thereby offering a substitute for traditional means of transportation such as cars and trains. It thereby fosters the reduction of environmental pollution and it contributes to wellbeing and personal health.

All rating actions and rated entities

BLS Beteiligungs GmbH

Issuer rating: BB+/Stable, affirmation

Senior secured debt rating: BB+, withdrawal

*All credit metrics refer to Scope-adjusted figures.

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 Outlook, (General Corporate Rating Methodology, 16 October 2023; European Business and Consumer Services Rating Methodology, 15 January 2024), 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 Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
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 these 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 Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Barna Szabolcs Gáspár, Director
Person responsible for approval of the Credit Ratings: Thomas Faeh, Executive Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 26 June 2023.

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, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties. 

Conditions of use/exclusion of liability
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