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Rating action

Scope Ratings GmbH (Scope) has today downgraded the issuer rating on Envien Magyarország Kft. and Envien International Ltd. to BB- from BB, revised the Outlook to Negative from Stable. Scope has also downgraded the rating on the HUF 5.5bn senior unsecured (guaranteed) bond (ISIN: HU0000360193) to B+ from BB-.

The downgrade is driven by weaker profitability affected by the challenging and increasingly volatile market conditions, leading to weaker business risk and financial risk profiles. The revision of the Outlook to Negative reflects Scope’s view that the pressure on credit metrics will persist over the next 12–18 months, reducing the headroom to a lower rating. The revised Outlook also incorporates the risk around waivers being granted for covenants breached in 2024 at subsidiary level, mitigated by positive preliminary discussions between Envien Group and the involved lenders that indicate a good resolution.

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

Key rating drivers

The issuer rating of Envien Magyarország is based on the credit metrics of its direct parent, Envien International Ltd. (Envien Group), considering its implicit guarantee to Envien Magyarország given the shared name identity, brand responsibility, intercompany funding as well as the parent’s explicit, unconditional and irrevocable guarantee on the bond issued by Envien Magyarország.

Business risk profile: B+ (revised from BB-). The revision of the business risk profile reflects weaker profitability, driven by persistently volatile sector conditions affecting biodiesel and bioethanol margins. Credit strengths continue to include the moderate market position and the diversification of the issuer’s production and agricultural commodity trading across several countries. Envien Group holds significant market shares in several mature, relatively protected biofuel markets in Central and Eastern Europe, particularly in Slovakia, where it meets the entire national demand, as well as in Hungary, the Czech Republic and Poland. The strong ties with MOL Group and the regulation-driven demand for biofuels are also credit-positive.

The Scope-adjusted EBITDA margin* was around 7% in 2024 (preliminary and unaudited), an improvement from the lows for both bioethanol and biodiesel in 2023. This was driven by an easing of the cost pressures felt in 2023, particularly the high energy and feedstock prices carried over from 2022, as well as the full use of waste-based capacity at the Rossi plant. For 2025, Scope expects the EBITDA margin to fall below 6.5%, due to narrowing spreads for single-counted biodiesel, partially offset by higher RSO crush margins and stronger spreads for double-counted and advanced biofuels. Bioethanol profitability is also projected to be more stable thanks to higher production. However, Scope’s base case factors in pressure from lower ethanol prices and rising energy and corn costs. For 2026 and 2027, the EBITDA margin is forecast to improve to around 6.5% and 7%, though still below historical levels, supported by investments executed and an optimised product and input mix. Nonetheless, sustained high imports and increasingly volatile input costs and harvest conditions will continue to create uncertainty and pressure profitability.

Other constraints on the business risk profile are the high commodity market volatility, limited production capacity within the EU, and the strong reliance on biofuels (over 80% of revenue), with a lack of exposure to less cyclical specialty chemical products. Customer concentration is also a risk, with over 50% of sales linked to MOL Group. However, this risk has eased after the Biopaliwa acquisition added key clients. Moreover, Envien Group has stable and synergistic ties with MOL through Rossi Biofuels, a joint venture at MOL’s Hungarian site.

Financial risk profile: BB+ (revised from BBB-). The financial risk profile remains the main supportive factor for the rating. The downward revision reflects weaker credit metrics, particularly regarding the debt/EBITDA leverage measure, given the higher debt and margin pressure from ongoing market volatility. A waiver for certain bank covenant breaches by subsidiaries is also yet to be granted, but Scope expects a pragmatic solution based on the early discussions between Envien Group and the banks as well as the group’s overall solid credit metrics, long relations with the banks and history of waiver approvals.

Debt (with a 25% haircut on cash and cash equivalents) increased to over EUR 230m at year-end 2024 from EUR 155m at year-end 2023. This was driven by higher overdrafts primarily and a slight increase in bank loans to refinance the acquisition of Biopaliwa. Debt also includes EUR 11.4m related to off balance-sheet guarantees. As a result, debt/EBITDA weakened to 3.8x at YE 2024 from 3.4x in 2023. In 2025, Scope expects leverage to remain close to 4.0x, with lower EBITDA offsetting lower debt. Similarly, funds from operations/debt declined to 19%, with a similar level projected in 2025. In 2026-2027, Scope also anticipates leverage to improve but remain close to 3.0x, reflecting an overall weaker financial risk profile.

EBITDA interest cover improved above 5.5x in 2024, supported by higher EBITDA. In 2025, Scope forecasts interest cover to decline to around 5.0x, driven by lower EBITDA, while interest payments remain broadly in line with 2024 levels of around EUR 11m. From 2026, interest payments are expected to fall only slightly due to lower gross financial debt. Combined with improving margins, this should lead to a recovery in the EBITDA interest cover to between 5.5x and 6.5x, remaining overall supportive of the financial risk profile.

Cash flow cover, as measured by free operating cash flow/debt, declined to 6% in 2024 from 43% in 2023 despite increasing EBITDA. This was due to cash absorption from working capital of around EUR 18m and moderate capex of EUR 9.4m in 2024, while EUR 46m of working capital releases in 2023 boosted free operating cash flow. Going forward, Scope expects cash flow cover to remain between 7% and 15%, with working capital normalising and capex assumed conservatively at around EUR 16m a year (excluding for large projects). The rating case also assumes dividend payouts of EUR 9m a year on average and no significant M&A. However, Scope also includes some moderate investment in 2025 to complete construction of ethanol capacity in the Indian equal joint venture with Zuari Industries Limited (expected to start production in H2 2025) and EUR 2m of divestments.

Liquidity: adequate (unchanged). Liquidity continues to be adequate, able to cover short-term debt of EUR 166m as of December 2024, primarily consisting of EUR 142m of drawn overdrafts. Scope projects that short-term debt coverage will exceed 100% over 2025–2027, supported by the conservative assumption of 50% recoverability of inventories, which comprise highly liquid raw materials and finished goods. Short-term debt during this period is expected to average EUR 162m a year, mainly from overdrafts, assumed to remain in line with 2024 levels.

Scope highlights that Envien Magyarország’s senior unsecured bond issued under the Hungarian National Bank’s Bond Funding for Growth Scheme has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 5.5bn) if the debt rating of the bond stays below B+ for more than two years (grace period) or drops below B-. Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period has been exhausted, leading to a higher risk of the rating-related covenant being triggered. Nevertheless, Scope believes that the impact of such covenant being triggered on issuer’s credit profile is mitigated by the relatively small size of the bond compared to the cash & cash equivalent levels of the group.

Financial covenants apply at various subsidiary levels, though in recent years some have been tested at consolidated level as well. In 2023, some subsidiaries breached bank covenants, but these were fully waived. As of December 2024, three subsidiaries breached covenants and, based on initial feedback from the banks, the management indicated that waivers will be most likely granted by March 2025. In addition, discussion is also ongoing regarding the resetting of the interest coverage threshold for one of the involved subsidiaries to align it to the level required by the second financing partner of the company. For now, Scope assumes no liquidity impact as a positive resolution is highly probable based on the company’s solid banking relationships, past waiver approvals, and management assurances. In addition, the agency believes Envien Group has sufficient financial headroom to repay or refinance debt positions at subsidiary level if creditors were to demand early repayment following uncured covenant breaches. However, Scope will continue to closely monitor the situation.

Supplementary rating drivers: credit-neutral (unchanged). The rating has no adjustments related to financial policy, peer group considerations, parent support, or governance and structure.

However, the complex corporate structure is credit-negative (negative ESG factor) which is reflected through a conservative assessment of the company’s consolidated financials. Various entities raise debt with local banks and covenants are almost entirely applied at subsidiary level, not at consolidated. The ownership structure above Envien International is also complex, composed of numerous legal entities and intermediate layers before reaching the ultimate private owners. Further, the only information disclosed on the private owners is that none own more than 25% of shares or voting rights. This limits transparency and increases regulatory risks, also because the intermediate entities are in different jurisdictions.

While requiring no negative adjustment for supplementary rating drivers, this complex structure has led to Scope’s conservative assessment of the financial risk profile and its overall weight within the issuer rating, also in light of the weak transparency and overview on covenant compliance. Given the continued pressure on profitability and its potential impact on covenant compliance at both group and subsidiary levels going forward, the limited visibility on covenant compliance and headroom as a result of the complex corporate and debt structure, if not properly addressed, could result in down-notching of the stand-alone credit assessment for supplementary rating drivers.

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

Outlook and rating sensitivities

The Negative Outlook reflects Scope’s view that some pressure on credit metrics will persist due to the continue pressure on operating profitability, with debt/EBITDA expected to remain close to 4.0x in 2025 and interest cover declining to around 5x, reducing headroom to a lower rating. The unresolved covenant breaches on bank loans also creates rating pressure, although a positive resolution is highly probable. Also, margin volatility might affect covenant compliance at both group and subsidiary levels in 2025, while limited visibility on covenant headroom and compliance due to the complex financing and group structure could put more pressure on the issuer rating.

The upside scenarios for the rating and Outlook are (collectively):

1.    Debt/EBITDA below 4.0x on a sustained basis
    
2. Agreement about a pragmatic solution to comply with 2024 covenants at subsidiary level with financing banks
    
3. Increasing transparency of covenant compliance at group and subsidiary level going forward

The downside scenarios for the rating and Outlook are (individually):

1. Debt/EBITDA at or above 4.0x on a sustained basis
    
2. Failure to obtain a waiver on covenant breaches for bank loans
    
3. Increasing risk for repeated non-compliance with covenants on bank loans

Debt rating

Envien Magyarország Kft. issued a HUF 5.5bn bond in 2021 under the Hungarian National Bank’s Bond Funding for Growth Scheme (ISIN: HU0000360193). The bond’s tenor is 10 years, maturing in May 2031. Envien International Ltd has provided an unconditional and irrevocable guarantee to the bond issued by Envien Magyarország, totalling HUF 6.1bn for the full value of the bond plus a contingency buffer to cover all costs incurred by Envien Magyarország. The bond is unconditional and unsubordinated, ranking as senior unsecured debt for Envien International.

Scope’s recovery analysis indicates a “low” recovery for senior unsecured bond, impacted by the material increase in higher-ranking bank debt over the past years. The recovery is based on an expected liquidation value in a hypothetical default scenario in 2026. These expectations translate into a B+ rating, one notch below the issuer rating.

Environmental, social and governance (ESG) factors

In line with the chemicals industry, Envien Group’s primary ESG considerations are environmental including pollution, raw material consumption, occupational safety, and regulatory compliance, which Scope considers credit neutral overall. However, the complex corporate structure is a negative ESG factor, as mentioned in detail under supplementary rating drivers.

All rating actions and rated entities

Envien International Ltd.

Issuer rating: BB-/Negative, downgrade and Outlook revision

Envien Magyarország Kft.

Issuer rating: BB-/Negative, downgrade and Outlook revision

Senior unsecured (guaranteed) debt instrument rating (ISIN: HU0000360193): B+, downgrade

*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 Outlooks, (General Corporate Rating Methodology, 14 February 2025; Chemical Rating Methodology, 16 April 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 Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks 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: Herta Loka, Senior Analyst
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 24 March 2021. The Credit Ratings/Outlooks were last updated on 14 March 2024.
The final Credit Rating for the bond (ISIN: HU0000360193) was first released by Scope Ratings on 6 May 2021. The final Credit Rating assigned to the bond was last updated on 14 March 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
© 2025 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.