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 affirmed the issuer rating of Hungarian construction company Masterplast Nyrt. at CCC/Stable and resolved the Under Review for a possible downgrade status. The senior unsecured debt rating has also been affirmed at CCC.

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

Key rating drivers

Bondholders provided a waiver at the end of November, allowing Masterplast to raise additional debt and stabilise its liquidity position in the short-term. This development, along with the successful drawdown of a new bank facility, has resolved immediate liquidity concerns, ensuring the repayment of the December 2024 bond obligations and alleviating near-term refinancing risks. Scope views these actions as positive for short-term financial stability.

Business risk profile: B (unchanged). The business risk profile remains unchanged since the prior review on 15 November 2024. Masterplast continues to face pressures from the prolonged contraction in Hungary’s construction market, with demand remaining subdued. Despite ongoing challenges, the company has maintained its market position, supported by cost-saving measures and operational adjustments.

Financial risk profile: CCC (revised from CC). The financial risk profile has improved since the last review, reflecting the resolution of immediate liquidity pressures. Sub-assessments indicate unchanged weak debt protection, highly elevated leverage, and constrained cash flow metrics. While there is potential for improvement in 2025, driven by expected stabilising market conditions and the full effect of cost-saving measures, the extent of any recovery remains uncertain. Furthermore, there is a possibility that liquidity concerns could arise again.

Liquidity: inadequate. The new bank facility, which was granted and drawn down in the past two weeks, has helped address immediate liquidity concerns, ensuring the timely repayment of the first bond obligation on 6 December 2024. Of the HUF 3bn total due, HUF 1.5bn was paid on this date, with the remaining HUF 1.5bn due on 21 December. An additional HUF 3bn is scheduled for amortisation in December 2025. Scope expects Masterplast to prepare well in advance for this repayment, which is considered manageable through operating results, given the absence of significant capital expenditure plans for 2025.

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

Outlook and rating sensitivities

The Stable Outlook follows Masterplast's successful drawdown of a new bank facility, which alleviated immediate liquidity pressures. The potential for positive developments, such as asset sales, working capital improvements, and further cost-cutting measures, is balanced by the uncertain nature of the recovery and the company's long-term liquidity situation. The repayment of bank loans is dependent on the company's ability to obtain refinancing, and an additional HUF 3bn bond amortisation is due in December 2025.

Masterplast is aware of its liquidity situation, and Scope expects the company to address refinancings and amortisation well in advance of their maturity to avoid a similar situation occurring in the future.

The upside scenario for the ratings and Outlook is:

1. Improved liquidity situation, with less reliance on short-term facilities being rolled over annually and the ability to manage bond amortisations ahead of schedule.

The downside scenario for the ratings and Outlook is:

1. Unfavourable business developments threatening the refinancing willingness of banks and putting additional strain on the company’s liquidity position.

For a more detailed analysis of the business and financial risk drivers of the current rating, please see the Rating Action Release published on 15 November 2024.

Debt ratings

Scope’s recovery analysis incorporates a hypothetical default scenario in 2025, based on the liquidation value of the company’s assets and an assumed outstanding senior secured bank debt of EUR 46.4m, with available overdrafts fully drawn, and senior unsecured debt of EUR 35.2m.

Scope estimates the recovery for all senior unsecured debt to be ‘above average.’ However, given the existing uncertainties in the construction industry and the potential for further issuance of secured bank facilities, the recovery rate on the senior unsecured debt could deteriorate. The senior unsecured debt rating is affirmed at CCC and its under-review status resolved, i.e. it is no longer under review for a possible downgrade.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

All rating actions and rated entities

Masterplast Nyrt.

Issuer rating: CCC/Stable, affirmation, resolved under review

Senior unsecured debt rating: CCC, affirmation, resolved under review

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; Construction and Construction Materials Rating Methodology, 25 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 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                                      NO
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: Patrick Murphy, Analyst
Person responsible for approval of the Credit Ratings: Thomas Faeh, Executive Director
The Credit Ratings/Outlook were first released by Scope Ratings on 9 September 2019. The Credit Ratings/Outlook were last updated on 15 November 2024.

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