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      Scope has completed a monitoring review for Wellis Magyarország Zrt.
      THURSDAY, 01/08/2024 - Scope Ratings GmbH
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      Scope has completed a monitoring review for Wellis Magyarország Zrt.

      The periodic review has resulted in no rating action.

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

      Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review for Wellis Magyarország Zrt. (rated B-/under review for a possible downgrade; senior unsecured debt rating B-/under review for a possible downgrade) on 26 July 2024.

      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.

      Key rating factors

      Based on H1 2024 interim management accounts, the rebound in profitability, which began in Q3 2023, has continued in 2024, with the Scope-adjusted EBITDA margin improving to above 9% (H1 2024: 9.4%). This is thanks to the large-scale rationalisation and reorganisation plan implemented in 2023, as well as the more supportive business environment, with demand gradually increasing on key Western European markets. Wellis’ financial risk profile, however, remains stressed.

      The B- issuer rating remains under review for a possible downgrade. Scope will closely follow developments related to the ongoing negotiations between the issuer and bondholders. These are currently at an advanced stage according to the issuer, and are expected to be resolved by September 2024 at the latest.

      A downgrade, not limited to one notch, would occur in case the issuer is unable to obtain a waiver from the bondholders well before the expiry of the grace period on 20 Oct 2024. This would require Wellis to repay the nominal amount (HUF 9.9bn) within 30 days, which would likely lead to a further deterioration of the company’s liquidity profile and could have default implications.

      The rating could be affirmed if Wellis is able to obtain a waiver from bondholders before the end of the grace period.

      A positive rating action could be conducted if i) Wellis obtained a waiver from creditors on the covenant breach well ahead of the end of the grace period, ii) sustainably improved its operating margin and credit metrics and iii) improved further its access to external funding such as working capital facilities.

      The B- long-term debt rating for senior unsecured debt issued by Wellis also remains under review for a possible downgrade.

      The methodologies applicable for the reviewed ratings (General Corporate Rating Methodology, 16 October 2023; Consumer Products Rating Methodology, 3 November 2023) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst Istvan Braun, Associate Director

      © 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis 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.

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