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Rating action

Scope Ratings GmbH (Scope) has today affirmed the BB-/Stable issuer rating of Infogroup Holding Kft. Scope has also affirmed the BB- senior unsecured debt rating of Infogroup Holding Kft.

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

Key rating drivers

Business risk profile: B+ (unchanged). Infogroup's business risk profile is constrained by its modest size, despite consistent growth from successful development projects (total assets of EUR 227m as of mid-2024, a 15% YoY increase), and by its exclusive operation within the Hungarian real estate market. This concentration exposes the company to potential cash flow volatility. However, Infogroup's strong, market-resilient profitability, achieved through prudent investments in less competitive but strategically important sectors (particularly the expanding light-industrial and logistics market), supports its business risk profile.

Infogroup focuses on the develop-to-hold business. Its portfolio is located exclusively in Hungary: in Budapest (offices and hotels) and Eastern Hungary (light-industrial/logistics). As a result, the company’s performance is correlated with the economic trends of only one country. Diversification is further constrained by high tenant concentration, with the top three tenants accounting for 40% of rental income as of 31 December 2024. Scope believes this risk is partially mitigated by the good credit quality of the largest tenants, such as Jabil, Bosch, Lidl and Freudenberg, as well as Infogroup's presence in three real estate segments with slightly different demand patterns (office, hospitality and light-industrial/logistics). Infogroup has established a strong reputation in its covered market, as evidenced by its high exposure to build-to-suit solutions, occupancy of 96% (unchanged YoY), and a WAULT of 5.25 years as of 31 December 2024 (6.8 years for the top three tenants), providing adequate visibility on future cash generation.

Profitability, as measured by the Scope-adjusted EBITDA margin*, is the main support for Infogroup's business risk profile. The margin saw sustained growth until 2021 but has recently declined due to increased development activity. The sale of a develop-to-sell industrial hall in Kecskemet to Hyundai Mobis generated significant revenues in 2023 and 2024. However, while lucrative, this project drove the 2024 margin down to approximately 50%. With the completion of the Hyundai Mobis sale, profit margins are projected to rebound to above 60% in 2025, bolstered by the expanding rental portfolio.

Infogroup’s focus on logistics continues to support Scope’s profitability assessment. This segment, unlike other real estate segments, has ensured stable cash flows, even during macro-economic headwinds. Scope expects logistics to further benefit from: i) the increased use of e-commerce; ii) companies’ pursuit of supply chain optimisation strategies; and iii) Hungary’s ambition to become a global hub for electric vehicles parts. Nonetheless, Scope’s assessment of profitability accounts for potential volatility arising from the uncertainty surrounding the office segment and new projects not yet included in the pipeline.

Financial risk profile: BB (unchanged). Infogroup’s financial risk profile is driven by moderate debt protection and a conservative loan/value (LTV) ratio, which reflects a prudent growth strategy.

In 2023, the company's EBITDA interest cover reached an exceptionally high 13.8x, primarily due to a significant increase in EBITDA from the 'develop-to-sell' project. While the project's cash flows continued to bolster EBITDA in 2024, the interest cover ratio fell to around 4.5x – based on preliminary results – due to new debt issuance. EBITDA interest cover is projected to range between 2x to 3x in the coming years, as the company takes on additional debt to fund its development pipeline, and interest on bank deposits become less favourable in Hungary.

Leverage, measured by the LTV ratio, has been slightly volatile over the years but remained moderate. Following a decrease to 22% in 2023, the ratio increased to 32% in 2024 (based on preliminary results) and is projected to rise further to above 40%. This rise will be driven by new debt financing (gross debt projected at HUF 68m by end-2025, vs. HUF 52m as at end-2024) required to support ongoing development activities and landbank investments. However, Scope foresees the LTV ratio remaining below 50% throughout the forecast period. Similarly, the debt/EBITDA ratio is expected to increase from its 2023-2024 lows (preliminary 2024: 5.1x), which was driven by the significant EBITDA from the Kecskemét project sale. Scope anticipates that the ratio will stabilise between 9x and 10x. The rating agency believes that current and projected leverage levels provide a sufficient buffer against potential market value declines and the need for additional financing. This is supported by a substantial pool of unencumbered assets, which, according to the issuer's 2024 preliminary results, covers unsecured debt by about 4.9x.

Liquidity: adequate (unchanged). Liquidity is adequate, as unrestricted cash (HUF 20.3bn as at end-2024) fully covers short-term debt obligations (HUF 2.6bn in 2025) and forecasted negative free operating cash flow of HUF 14.8bn. The issuer's internal guidance to maintain a cash-to-debt ratio of 15%-20% has been consistently surpassed (50% in 2023 and in 2024 based on preliminary results).

Infogroup’s senior unsecured bond issued under the Hungarian Central Bank’s bond scheme has an accelerated repayment clause. The clause requires Infogroup to repay the nominal amount (HUF 4.5bn) in case of a rating deterioration (two-year cure period for a B/B- rating, repayment within five days after the bond rating falls below B-, which could have default implications). The rating headroom to enter the grace period is two notches; Scope therefore sees no significant risk of the rating covenant being triggered. In addition to the rating deterioration covenant, financial bond covenants include a cap on the dividend payment (maximum 50% of profit after tax and only if the LTV ratio does not exceed 50%) and a maximum LTV ratio of 60%.

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

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s assessment that Infogroup will maintain moderate growth. Scope anticipates that strong operating performance, supported by secure and recurring revenue, will offset expected pressure on interest coverage and leverage from pipeline execution. This will enable Infogroup to keep its loan to value ratio below 50% and interest coverage above 2x. The Outlook also assumes continued high occupancy and pre-leasing rates.

The upside scenario for the ratings and Outlook is:

• Significant improvement in business risk profile through increase in size, leading to enhanced tenant diversification while keeping credit metrics at the current level, a scenario considered remote at present.

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

• Loan/value ratio above 55%.
   
• EBITDA interest cover below 2x on a sustained basis.

Debt rating

In May 2021, Infogroup issued a HUF 4.5bn senior unsecured bond (ISIN: HU0000360433) through the Hungarian Central Bank’s Bond Funding for Growth Scheme. The bond proceeds were used to refinance financial debt (HUF 0.8bn) and for acquisitions (HUF 3.7bn). The bond has a tenor of 10 years and a fixed coupon of 3.0%. Bond repayment is in six tranches starting from 2026, with 10% of the face value payable yearly and a 50% balloon payment at maturity.

Scope has affirmed the BB- rating of Infogroup’s senior unsecured debt. The assessment is based on a hypothetical default scenario in 2026 and on the issuer’s liquidation value, resulting in an average recovery of the senior unsecured debt. The rating is also supported by the company’s large pool of unencumbered assets.

Environmental, social and governance (ESG) factors

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

All rating actions and rated entities

Infogroup Holding Kft.

Issuer rating: BB-/Stable, affirmation

Senior unsecured debt rating: BB-, 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, (European Real Estate Rating Methodology, 28 March 2024; General Corporate Rating Methodology, 14 February 2025), 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: Claudia Aquino, Associate Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 27 March 2023. The Credit Ratings/Outlook were last updated on 25 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
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