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 resolved the under-review status for a developing outcome of B+N Referencia Zrt.’s (B+N) ratings and affirmed the BB issuer rating with a Negative Outlook. Concurrently, the BB rating on senior unsecured debt has been affirmed.

The rating action follows the acquisition of KÖBERL Group by B+N, a German facility management services provider which resulted in an unchanged moderate business risk profile and good financial risk profile. The largely debt-financed acquisition is estimated to temporarily deteriorate leverage to 2.2x in 2025; however, credit metrics are forecasted to improve thereafter driven primarily by the increased demand for B+N’s fit-out division. The Negative Outlook flags the delay in payment by important customers that have led to large swings in intra-year working capital and may potentially lead to liquidity constraints and loss of business.

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). B+N's business risk profile remains largely unchanged following the acquisition of the German KÖBERL Group. With the acquisition, B+N has entered the German market, thereby marginally improving the group’s market positioning and diversification. B+N continues to benefit from the group’s moderate market position, operating profitability and service strength, while the high geographical and customer concentration risk remains a significant constraint as the dependency on Hungarian public contracts remains high.

In 2024, B+N’s Scope-adjusted EBITDA margin* improved to 11.3% from 9.7% in 2023 driven by business expansion and increasing demand for the historically highly profitable fit-out division. Scope expect further EBITDA margin improvements towards 12% in 2025 and 2026, driven by continued demand for B+N’s fit-out division.

B+N’s service strength is characterised by a regionally known brand, a medium churn rate with multi-year contracts, adequate cross-selling potential, and low switching costs.

Financial risk profile: BBB+ (unchanged). B+N financed the majority of the EUR 153m purchase price for KÖBERL Group with debt by taking out an EUR 130m loan in 2025. The additional debt is expected to increase leverage as measured by debt/EBITDA to 2.2x in 2025. However, the significant negative impact of the new debt is expected to be temporary as it will at least partially be offset by the higher cash flow generation post-acquisition. B+N’s strong interest coverage is forecasted to be above 10x in 2025 and 2026 supported by favourable, subsidised fixed interest rates for the majority of the debt portfolio.

The financial risk profile is hindered by the relatively weak cash flow cover which is negatively impacted by the historically volatile working capital changes. In 2025 and 2026, the cash flow cover (FOCF/debt) is forecasted to trend between 5% and 25%. Large swings in working capital and non-payment by customers may lead to loss of business and liquidity constraints.

Liquidity: adequate (revised from inadequate). Although large fluctuations in working capital continue to negatively impact B+N’s intra-year liquidity, the group has sufficient internal and external funds to cover short-term obligations at year-end. The adequate assessment is supported by the ample recurring free operating cash flow and cash and cash equivalents. These lead to a robust overall liquidity ratio of well above 200% in 2025 and 2026.

Scope highlights that B+N’s 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 10bn and HUF 13.2bn) if the debt rating of the bonds stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 5 business days). Such a development could adversely affect the group’s liquidity profile. The rating headroom to entering the grace period is two notches. Scope therefore sees no significant risk of the rating-related covenant being triggered.

Supplementary rating drivers: -1 notch (unchanged). The rating reflects a negative one-notch adjustment pertaining to the significant credit risk posed by weaknesses in the issuer’s governance and transparency (negative ESG factor). On the one hand, the rating adjustment reflects the key person risk associated with the rated entity’s CEO, Mr. Ferenc Kis-Szölgyémi primarily due to the issuer’s high dependence on Hungarian state procurements. A materialisation of key person risk could impair access to tenders and lower operational effectiveness. On the other, the negative rating adjustment also reflects the issuer’s weak transparency, in particular the limited transparency on B+N’s reporting, dividend policy and financial policy, which is detrimental to creditors as it constrains visibility.

Scope notes the weak predictability of the business plan due to the group’s high customer concentration risk and dependency on public contracts.

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

Outlook and rating sensitivities

The Negative Outlook reflects the risk that debt/EBITDA may surpass the maximum threshold for the current rating of 2.5x. Such a scenario could be driven by a lower demand for the fit-out business or loss of business. Moreover, the Outlook incorporates Scope’s concerns about the group’s weaknesses on its intra-year cash management related to cash recognition from government contracts which limits the group’s flexibility on liquidity.

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

1. Debt/EBITDA increasing to above 2.5x on a sustained basis
    
2. No achievement of a sustained solution that addresses the ongoing weakness on intra-year cash management and revenue recognition from the important contracts

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

1. Debt/EBITDA not increasing to above 2.5x on a sustained basis
    
2. Achievement of a sustained solution that addresses the ongoing weakness on intra-year cash management and revenue recognition from the important contracts

Debt rating

In December 2019, B+N issued a HUF 10bn senior unsecured bond (ISIN: HU0000359419), followed by a second HUF 13.2bn senior unsecured bond (ISIN: HU0000360623) in June 2021, both through the Hungarian central bank’s Bond Funding for Growth Scheme. The bond proceeds were used for refinancing loans, financing acquisitions and investment capex. Both bonds have tenors of 10 years and fixed coupon rates of 2.9%. and 3.5% respectively. The bond repayment schedule for HU0000359419: in four equal instalments with 25% of the face value payable yearly starting in the seventh year. The bond repayment schedule for HU0000360623: in eight equal instalments with 12.5% of the face value payable yearly starting in the third year. Amortisation of the bonds commences in 2026 and 2024 respectively. In addition to the rating deterioration covenants, the bond covenants include non-payment, insolvency proceedings, cross-default, pari passu, negative pledge, change of control and dividend payment restrictions and asset covenants.

Scope’s recovery expectations for B+N’s senior unsecured debt are based on a going concern assumption under a distressed scenario (i.e. enterprise value at default). The recovery analysis is based on a hypothetical default in 2026, which assumes outstanding senior secured debt of HUF 51m and senior unsecured debt of HUF 14m. Scope’s analysis indicates an ‘average’ recovery for such senior unsecured debt positions, resulting in a BB rating, the same as the issuer rating.

Environmental, social and governance (ESG) factors

The rating reflects a negative 1-notch adjustment pertaining to the significant credit risk posed by weaknesses in the issuer’s governance. The rating adjustment reflects the risks related to key person risk and limited transparency on B+N’s reporting, dividend policy and financial policy, as exemplified by previous dividends categorised as other expenses.

All rating actions and rated entities

B+N Referencia Zrt.

Issuer rating: BB/Negative, 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 Outlook, (General Corporate Rating Methodology, 14 February 2025; European Business and Consumer Services Rating Methodology, 15 January 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 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 Outlook and the principal grounds on which the Credit Ratings and Outlook are based. Following that review, the Credit Ratings and Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlook are UK-endorsed
Lead analyst: Vivianne Kapolnai, Senior analyst
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 4 October 2019. The Credit Ratings/Outlook were last updated on 20 December 2024.

Potential conflicts
See 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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