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Rating action

Scope Ratings GmbH (Scope) has today affirmed the B+ issuer rating of Sun Group Kft. and assigned a Stable Outlook. Concurrently, Scope has also affirmed the B+ rating on the senior unsecured bond (ISIN: HU0000361225) guaranteed by Prohuman Zrt. in addition to PHU Holding Kft. and Profólió Projekt Tanácsadó Kft. Consequently, the under-review status for a possible downgrade on the ratings has been resolved.

The rating action follows an agreement with bondholders to revise the financial covenant threshold related to the net debt/EBITDA ratio to 3.5x for the HUF 15.4bn bond issued under the Hungarian National Bank's Bond Funding for Growth Scheme and to add two guarantors. The business and financial risk profile of Sun Group remain unchanged based on the preliminary FY2024 results.

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). Sun Group’s competitive position benefits from the established regional footprint of its main subsidiary Prohuman (Prohuman and its subsidiaries account for nearly 99% of the group’s revenue), in the fragmented HR services market of Central and Eastern Europe. It holds strong market positions in Hungary (approx. 17% share), Romania (approx. 17%, third-largest provider), and is well-positioned for growth in Serbia, where recent labour law changes favour staffing expansion. The company’s exposure to a wide client base across multiple industries helps cushion the impact of sector-specific downturns, although the core reliance on temporary staffing and concentration in Hungary make it vulnerable to economic shocks. Flexible labour laws in Hungary and the Central and Eastern Europe region enable companies to adjust workforce sizes quickly (ESG factor: credit-negative), which has historically shielded profitability during economic downturns. However, the introduction of stricter labour regulations in the future could pose additional risks to profitability. Sun Group’s Scope-adjusted EBITDA margin* declined to 5.9% in 2023 from 7.7% in 2022, primarily due to reduced demand from high-margin sectors and persistent inflationary pressures. Based on preliminary 2024 figures, the margin stands at 5.8% and is expected to remain broadly flat or slightly below this level, reflecting the group’s ongoing exposure to lower-margin segments and the inherently margin-sensitive nature of the temporary staffing industry.

Financial risk profile: B+ (unchanged). Credit metrics stabilised in 2024 after weakening in 2023 when lower earnings and higher working capital needs put pressure on financial risk. According to the preliminary 2024 results, debt/EBITDA stands at 3.4x, supported by the repayment of a state-subsidised working capital loan under Hungary’s BAROSS programme and increased reliance on factoring lines. EBITDA interest cover has declined due to the repayment of the low-interest BAROSS loan and the higher cost typically associated with factoring, which reflects elevated credit risk. Free operating cash flow/debt turned positive, helped by more stable working capital dynamics.

For 2025–2026, Scope anticipates further deleveraging, driven by gradual EBITDA growth. Interest cover is projected to remain within the range of 4x to 7x, while free operating cash flow/debt is expected to fluctuate between 5% and 15%. Improved receivables collection and continued use of factoring will be key to sustaining liquidity, although ongoing margin pressures and exposure to cyclical risks in the automotive sector may constrain the pace of deleveraging.

The issuer breached its 3.0x net debt/EBITDA covenant in 2023, which was subsequently waived. A revised threshold of 3.5x in 2024 offers a modest buffer. Preliminary results suggest covenant compliance, though maintaining adequate headroom will hinge on EBITDA recovery and tighter control over cash flow.

Liquidity: adequate (unchanged). Sun Group’s liquidity is adequate, with cash sources (available cash of HUF 2.4bn as of end-2024, HUF 2bn in unutilised committed financing facilities, and forecasted free operating cash flow of HUF 2.3bn in 2025) fully covering short-term debt obligations of HUF 1.8bn due in the 12 months to end-December 2025. The company will be able to repay its debt in the next 12-18 months, as all short-term debt relates to amortising loans. Scope considers liquidity and refinancing risks to be limited for Sun Group, supported by the absence of significant debt maturities, with no major repayments due before 2027. However, liquidity could face pressure from significant working capital fluctuations, such as delayed customer payments. This risk could be partially mitigated through the use of factoring.

Scope highlights that Sun Group’s senior unsecured bonds 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 15.4bn) 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 company’s liquidity profile. The rating headroom to entering the grace period is 0 notches. Given the limited rating headroom, the company must at least maintain its current credit profile to avoid triggering the rating-related covenant. In addition to the rating deterioration covenant, financial bond covenants include a net debt/EBITDA not exceeding 3.5x, tested yearly. The issuer complied with these covenants during 2024.

Supplementary rating drivers: credit-neutral (unchanged). While the rating has not been adjusted for financial policy, peer group considerations, parent support, or governance and structure, Scope has identified governance and structure weaknesses in the rated entity, in particular poor transparency and inadequate financial planning. Inadequate financial planning is especially detrimental to creditors as it constrains visibility into the future development of credit metrics (ESG factor: credit-negative). Scope has reflected these risks in its financial risk profile and standalone creditworthiness assessments, negating the need for down-notching for supplementary rating drivers.

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

Outlook and rating sensitivities

The Stabe Outlook assumes sustainable compliance with all (financial) covenants. Debt/EBITDA is expected to remain within the 3-4x range.

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

1. Debt/EBITDA below 3x on a sustained basis.
    
2. Improved diversification in the HR business in terms of services or geographies, including achieving a top-three market share in countries of operation.

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

1. Debt/EBITDA increasing to above 4x on a sustained basis.
    
2. Weakened liquidity due to very large working capital swings, increased shareholder remuneration.
    
3. Non-compliance with (financial) covenants.

Debt rating

In January 2022, Sun Group issued a HUF 15.4bn senior unsecured bond guaranteed by subsidiary Prohuman Zrt in addition to holdings PHU Holding Kft. and Profólió Projekt. The bond proceeds were used for the acquisition of Prohuman Zrt. The bond has a tenor of 10 years and a fixed coupon of 5.5% yearly. Bond repayment is in five tranches starting from 2027, with 10% of the face value payable yearly and a 50% balloon payment at maturity.

Scope expects an ‘average’ recovery for the senior unsecured (guaranteed) bond (ISIN: HU0000361225), which translates into a B+ rating in line with that of the issuer.

The average recovery is based on the asset-light nature of HR services and the issued bond’s ranking behind the senior secured creditors of Sun Group. The recovery level is based on an expected distressed enterprise value as a going concern in a hypothetical default scenario of around HUF 13.5bn in 2026 and a 10% haircut on that value for administrative claims.

Environmental, social and governance (ESG) factors

Material social ESG factors for corporates offering asset-light business services primarily include labour management risks related to labour conditions (human rights, safety, employment is typically short term and the workforce is easily let go, physically stressful working conditions, accommodation for immigrant workforce).

Specific governance and structure weaknesses for Sun Group include poor transparency and inadequate financial planning. Inadequate financial planning not only reduces transparency but also impairs the ability to project future credit metrics accurately, creating uncertainty for creditors. This lack of visibility can heighten perceived risk, particularly during periods of financial stress, and erode confidence in the issuer's ability to manage obligations effectively. Governance shortcomings, such as deficient planning and oversight, may result in missed financial targets and undermine long-term stability, contributing to downward pressure on credit ratings.

All rating actions and rated entities 

Sun Group Kft.

Issuer rating: B+/Stable, affirmation

Senior unsecured (guaranteed) debt instrument rating (ISIN: HU0000361225): B+, affirmation

*All credit metrics refer to Scope-adjusted figures except for the net debt/EBITDA financial covenant.

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, 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 Rating if the Credit Rating 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: Azza Chammem, 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 21 December 2021. The Credit Ratings/Outlook were last updated on 29 January 2025.

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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