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 BB- issuer rating on ITK Holding Zrt. (ITK) and revised the Outlook to Negative from Stable. Scope has upgraded the senior unsecured debt rating to BB- from B+.

The Outlook change to Negative from Stable reflects the Scope’s concerns related to sustained parent support from ITK’s main shareholder, Hungarian oil and gas incumbent MOL Group (rated BBB-/Positive by Scope). This support is shown through 1) increased intragroup sales, including ITK’s procurement of garbage trucks for MOL’s waste management subsidiary; and 2) the HUF 18bn credit facility provided to ITK to refinance maturing third-party loans and finance working capital. Additionally, MOL provided a support letter as an addendum to ITK's 2024 annual report, stating that the group is willing and able to support the issuer in case its liquidity profile deteriorates, but only valid from for the upcoming 12 months. The reduction of financial and operational support from MOL Group might result in rapid deterioration of ITK’s liquidity profile.

ITK's credit metrics remain highly stressed despite the improving operating profitability, stemming from the high level of financial debt. Free operating cash flow (FOCF)* also remains under pressure due to greater working capital needs.

The upgraded senior unsecured debt rating is based on the replacement of senior secured debt with an intercompany loan ranking pari passu to all unsecured debt.

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 (revised from B+). The weaker business risk profile is due to the lower diversification in terms of activities (discontinued manufacturing business) and customers (more focus on intercompany sales). The sole geographical focus on Hungary also constrains the issuer’s ability to mitigate adverse macroeconomic effects.

Also credit-negative is ITK’s small absolute size, with revenues of HUF 45bn in 2024. For 2025, Scope forecasts revenue to increase by 7%, driven by the yearly indexation of long-term transport contracts and the forecasted organic growth of the general distribution business.

On the other hand, the moderate, gradually improving operating profitability is supportive. In 2024, the EBITDA margin returned close to its historical average, boosted by high recurring revenues in the transport business. Manufacturing again made high losses in 2024, which prompted management to downsize the business significantly in 2024 before exiting fully in 2025. Scope expects this action to help the EBITDA margin improve steadily towards 13% until 2026.

Financial risk profile: CCC (unchanged). ITK’s financial risk profile is supported by the improving interest cover but remains constrained by high leverage and negative FOCF until 2026.

Leverage measured by debt/EBITDA remains high at close to 13x in 2024. Scope considers the intercompany credit facility provided by MOL Group as debt, meaning the replacement of bank financing with intragroup sources does not constitute deleveraging. Scope expects leverage to remain above 10x into the medium term.

Interest cover remains the main positive driver of the financial risk profile, benefiting from the low rate (2.9%) on the HUF 20bn bond issued under the Hungarian bond scheme. The metric increased to 1.5x in 2024 from below 1.0x in 2023 due to improving EBITDA generation, while interest expense remained relatively stagnant. As interest on the intercompany credit facility capitalises, Scope expects cash interest expense to gradual decrease towards HUF 2.7bn, moving interest cover sustainably above 2.0x from 2025.

High growth capex has resulted in significantly negative FOCF in recent years, including in 2024. Going forward, Scope expects capex to moderate, starting with HUF 4.0bn in 2025, down from HUF 7.3bn in 2024, due to the end of the investment cycle and the start of the business rationalisation strategy. Together with cash from working capital (mainly from lower inventories), FOCF is expected to turn positive in 2026.

Liquidity: adequate (unchanged). Liquidity is assessed as adequate. Although available cash sources are insufficient to cover cash uses for 2025 (HUF 919m cash as at YE 2024 against negative HUF 2.7bn FOCF and HUF 5.6bn of short-term debt), MOL’s support letter, indicating its ability and willingness to provide liquidity support if needed, eliminates short-term liquidity concerns.

Scope highlights that ITK’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 20bn) if the debt rating of the bonds stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within five days). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is one notch. Scope therefore sees no significant risk of the rating-related covenant being triggered. 

Supplementary rating drivers: +3 notches (unchanged). The three-notch uplift to the standalone credit assessment of B- reflects the strong support from parent MOL, which enhances ITK’s financial stability, risk management and professional backing. ITK has significant strategic importance to MOL, forming part of its Mobility strategy through the key areas of car sharing, bike sharing, fleet management and public transport.

Outlook and rating sensitivities

The Negative Outlook reflects sustained pressure on leverage and cash flow coverage, as well as the short-term nature of MOL's financial support. This results in uncertainty regarding continued adequate liquidity.

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

1. Improved confidence in medium-term financial support from MOL, reducing uncertainty on liquidity assessments
    
2. Debt/EBITDA below 6.0x, for example through a recapitalization paired with positive free operating cash-flow, which allows for organic deleveraging

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

1. No improved confidence in medium-term financial support from MOL Group, increasing uncertainty in liquidity assessments
    
2. Debt/EBITDA remaining at or above 6.0x

Debt rating

In 2021, ITK issued a HUF 20bn senior unsecured bond (ISIN: HU0000360631) under Hungary’s bond scheme. Proceeds were used to refinance most of its debt. The fixed-rate bond has a 10-year tenor, with yearly amortisation of 10% in 2027-2028 and 20% in 2029-2030, ending with a 40% bullet maturity in 2031.

Scope has upgraded the rating on senior unsecured debt to BB- from B+ now in line with the issuer rating. This reflects the replacement of senior secured debt, which ranks above the senior unsecured bond issued under the Hungarian scheme, with an intercompany loan ranking pari passu with all other unsecured debt. Scope expects an ‘average’ recovery for outstanding senior unsecured debt in a hypothetical default scenario in 2026, based on the liquidation value approach.

Environmental, social and governance (ESG) factors

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

All rating actions and rated entities

ITK Holding Zrt.

Issuer rating: BB-/Negative, Outlook change

Senior unsecured debt rating: BB-, upgrade

*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, (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/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: Istvan Braun, Senior Representative
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 14 April 2021. The Credit Ratings/Outlook were last updated on 24 May 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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