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Rating action

Scope Ratings GmbH (Scope) has affirmed its BB/Stable issuer rating on Hungary-based investment holding company Opus Global Nyrt (Opus). Scope has also affirmed the BBB- senior unsecured debt rating.

The rating affirmation reflects Opus' good financial risk profile, in particular total cost cover, supported by its cash-generative investment portfolio and lean cost structure. The better-than-expected operating performance in FY 2023 is the result of higher-than-expected interest income. Despite significantly higher dividends from the industrial sector already paid in 2024, Scope expects total cost cover to deteriorate from 3.2x in FY 2023 to 2.1x in FY 2024 due to the changed shareholder-focused financial policy. However, the rating continues to benefit from Opus' strong total cost cover, which Scope expects to remain well above the negative rating trigger in the medium term. In addition, the rating affirmation reflects Opus' conservative and long-term buy-and-build investment approach, which has resulted in growing portfolio value, positively impacting the loan/value ratio.

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). Opus' business risk profile remains constrained by its modest portfolio sustainability: the company relies heavily on cash inflow from Mészáros és Mészáros Zrt., which constituted over 65% of total cash inflows in FY 2023. Any adverse developments or changes in Mészáros és Mészáros Zrt.'s financial performance could therefore significantly impact Opus’ cash flow stability and overall portfolio sustainability. Furthermore, the business risk profile is constrained by portfolio liquidity, which is not expected to change in the short-to-medium term.

The activities of Opus' core holdings are mainly concentrated in the Hungarian market, exposing the company to risks related to local economic conditions. However, the sizeable energy segment, whose share in the investment portfolio is gradually increasing, now provides a more balanced asset value diversification than in previous years. In recent years, Opus has streamlined its portfolio through strategic acquisitions and disposals. In the short to medium term, the focus for growth is on internal synergies within the existing portfolio. No major portfolio rebalancing is expected in the foreseeable future.

The mix of weighted average industry portfolio risk has remained unchanged, despite the net asset value appreciation in both food processing and energy sectors recently.

Financial risk profile: BBB- (unchanged). Opus' financial risk profile is stronger than its business risk profile due to the cash-generating nature of its portfolio. Strong portfolio growth resulted in an improvement of credit metrics in 2023, with leverage, as measured by loan/value*, decreasing to 37% (from 43% in 2022). Scope expects debt to continue on a downward trajectory in the medium term, thanks to the good performance of the core portfolio, the declining nature of guarantees and the amortisation of bonds from 2026 onwards.

Scope expects total cost cover to remain above 2.0x for the next few years, supported by: i) relatively stable management and service fees; ii) increasing interest received on shareholder loans; and iii) fixed interest payments on the outstanding bonds. However, the agency also believes that the introduction of significant dividend payments to shareholders will put pressure on total cost cover. In addition, the sharp increase in dividends from the industrial segment (already paid in 2024) raises concerns about the core holding company's ability to pay dividends on a sustainable basis based on its operating performance.

Liquidity: adequate. Opus’ liquidity remains adequate. This is mainly driven by limited short-term debt positions and sound total cost cover.

Opus’ senior unsecured bonds issued under the Hungarian National Bank’s Bond Funding for Growth Scheme have a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 67.7bn) if the debt rating of the bonds stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 90 days). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is five notches. Scope therefore sees no significant risk of the rating-related covenant being triggered.

Supplementary rating drivers: The ratings are unaffected by supplementary rating drivers. However, governance is considered a negative aspect (ESG factor), which is taken into account through the assessment of the 'investment philosophy' and the overall blending of the good FRP.

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

Outlook and rating sensitivities

The Stable Outlook incorporates a broadly unchanged investment portfolio over the next two years, a focus on developing the existing portfolio, no major cash outflows (other than the already envisaged share buyback programme of HUF 10bn over the next three years and dividend payments to shareholders) as well as total cost cover significantly above 1.0x.

The upside scenario for the ratings and Outlook would require:

• Improved business risk particularly with regard to concentration risks related to dividend income. However, Scope does not foresee any material changes in this regard in the short-to-medium term.

The downside scenario for the ratings and Outlook would require:

• Total cost cover to be sustained below 1.0x.

Debt ratings

Scope has affirmed the senior unsecured debt rating at BBB-, including the HUF 28.6bn (ISIN HU0000359278) and HUF 39.0bn (ISIN HU0000360409) bonds, two notches above the issuer rating, reflecting superior recovery prospects.

Scope performed a recovery assessment for the senior unsecured debt category. For this assessment, Scope constructed a hypothetical default scenario in 2026, derived a liquidation value and compared it with the senior unsecured debt in order to determine its recovery rate. Scope calculated a superior recovery of Opus’ senior unsecured debt positions, mainly supported by very little secured bank debt ranking ahead, and the comparatively high market value of portfolio companies. Even discounting this value by 50% and adding guarantees and suretyships of about HUF 40bn, senior unsecured debt is likely to be recovered.

Scope’s assessment assumes no cross-default clauses in the portfolio companies’ debt documentation.

Environmental, social and governance (ESG) factors

ESG factors have impacted this rating action. Scope remains concerned about the frequent changes in top management at Opus (the latest at the end of 2022), which were not previously flagged and may impact governance transparency. While there were no management changes in 2023, there has been high volatility in the composition of top management in recent years, some of which remains unexplained, which is not conducive to long-term planning and strategy. Although this credit-negative factor did not result in a negative rating adjustment under supplementary rating drivers, it impacts the rating somewhat negatively through Scope’s assessment of the company’s ‘investment philosophy’ and the overall blending of Opus’ good financial risk profile.

All rating actions and rated entities

Opus Global Nyrt.

Issuer rating: BB/Stable, affirmation

Senior unsecured debt rating: BBB-, affirmation

*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; Investment Holding Companies Rating Methodology, 17 May 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 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 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: Zurab Zedelashvili, Director
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 29 August 2019. The Credit Ratings/Outlooks were last updated on 3 August 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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