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Rating action

Scope Ratings GmbH (Scope) has today affirmed the issuer rating of Hungarian spa manufacturer Wellis Magyarország Zrt. at CCC/Stable. Scope has also affirmed the B- rating of the senior unsecured guaranteed bond (ISIN: HU0000360250). The rating action resolves the under-review status for a possible downgrade.

The affirmation of the issuer rating follows the restructuring of Wellis’ secured and unsecured debt, which has reduced its yearly debt servicing to around HUF 2.5bn from HUF 4.0bn. Additionally, the rating deterioration covenant of the senior unsecured guaranteed bond has been waived until December 2028, providing additional headroom for a rating recovery. The restructuring of the senior secured and unsecured debt instruments does not constitute a distressed debt exchange under Scope’s Credit Rating Definitions.

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). Wellis’ business risk profile continues to be supported by moderate diversification in terms of geographies, customers and suppliers. Further support is provided by the issuer’s brand strength, benefitting from the international scope of branded sales as well as the solid quality of its products. The limited absolute size in a global context and limited medium-term visibility on the development of demand conditions are constraints.

The issuer's operating profitability has been highly volatile for years due to shifts in global demand and changes in input prices. From 2024, however, Scope-adjusted EBITDA margin* has shown a clear positive trajectory (2024: 5.8%; 2023: 0.6%), as reflected in the interim 2025 accounts (August 2025: 8.0%). The reason for the recovery is the large-scale cost-cutting and rationalisation programme, focused on aligning production capacities with the changed business environment.

Scope highlights that demand conditions on key Western European and US markets are still highly volatile and could be subject to rapid deterioration. Scope has therefore taken a more conservative stance regarding the EBITDA margin development, foreseeing a gradual improvement to above 7% in the medium term.

Financial risk profile: CCC (unchanged). The financial risk profile is supported by the moderate interest cover. Sustained high leverage, volatile free operating cash flow (FOCF) generation and inadequate liquidity are credit constraints.

Due to a slower-than-expected EBITDA recovery, debt/EBITDA remained slightly above 10.0x in 2024. Although Scope expects relatively stable EBITDA generation in the coming years, Scope foresees gradual deleveraging, mainly due to the debt amortisation (around HUF 2.5bn yearly). Thus, leverage is expected to move below 6.0x only in the medium term.

Although subject to increased volatility in recent years, FOCF turned positive in 2024, primarily due to the positive development of working capital and lower capex than in previous years. Going forward, FOCF/debt is expected to remain positive, supported by reduced capex needs, stable EBITDA generation and lower sustained inventory levels. Scope flags, however, the potential volatility in FOCF generation, exposed to changes in EBITDA generation and changes in working capital.

Liquidity: inadequate, -2 notches (unchanged). Liquidity is assessed as inadequate. The sources (HUF 478m available cash at YE 2024 and HUF 3.4bn FOCF forecasted for 2025) does not cover the short-term debt of HUF 4.8bn. Scope notes the lack of ample headroom and cash buffer available to mitigate the potential volatility of FOCF generation, resulting in remaining concerns related to medium-term liquidity.

Scope highlights that Wellis’ senior unsecured guaranteed 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 9.9bn) if the debt rating of the bonds stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 45 days). Such a development could adversely affect the company’s liquidity profile. Following the downgrade of the senior unsecured guaranteed bond rating to B- on 20 October 2022, Wellis has entered the grace period. Based on the restructured debt prospectus dated 13 October 2025, the rating deterioration covenant is waived until December 2028. This means the company must ensure the debt rating returns to B+ before the waiver period ends. If the debt rating does not return to B+ within the waiver period, the company could face severe liquidity constraints and enter a default, unless it obtains refinancing that covers the early repayment of the outstanding bond amount or it proactively obtains an investor waiver related to the accelerated repayment. 

Supplementary rating drivers: credit-neutral (unchanged). While the rating assessment does not include any adjustments for supplementary rating drivers, Scope notes financial policy issues regarding a lack of transparency and reliable planning, as these significantly reduce visibility and reduce the issuer’s ability to prevent a quick deterioration of credit metrics. Frequent changes in financial planning are especially detrimental to creditors as this constrains visibility and may indicate underlying operational issues.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s assumption that Wellis can fulfil its rescheduled debt service obligations. Scope expects FOCF to remain positive in the medium term, driven by: i) the EBITDA margin stabilising at around 7%; ii) prudent management of working capital, with inventory levels remaining close to HUF 12bn; and iii) capex staying at maintenance levels.

The upside scenario for the ratings and Outlook is:

1. Elimination of short-term liquidity pressure

The downside scenario for the ratings and Outlook is:

1. Perceived deterioration in the liquidity profile

Debt rating

Scope has affirmed the senior unsecured guaranteed bond (ISIN: HU0000360250) rating at B-, one notch above the issuer rating. This is based on the ‘above average’ recovery expectation for senior unsecured debt holders in a hypothetical liquidation scenario in 2026. The recovery calculation includes all Wellis’ real estate properties, at market value based on valuations dated February 2025. The recovery calculation also includes the additional collateral behind Wellis’ secured debt.

Wellis issued a HUF 9.9bn senior unsecured bond under Hungary’s Bond Scheme in 2021, which was restructured into a senior unsecured guaranteed bond in September 2024. The bond’s tenor is 10 years, with a coupon of 3.0% until September 2024, and 3.5% afterwards until the debt instrument rating recovers to at least B+. Repayment is in six tranches: 20% of the face value in 2026; 10% yearly between 2027 and 2030; and 40% at maturity in 2031.

Environmental, social and governance (ESG) factors

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

All rating actions and rated entities

Wellis Magyarország Zrt.

Issuer rating: CCC/Stable, affirmation

Senior unsecured (guaranteed) debt instrument rating (ISIN: HU0000360250): B-, affirmation

The rating was prepared following Scope’s Consumer Products Rating Methodology, 31 October 2024. The application of the Consumer Products Rating Methodology, 31 October 2025, does not have an impact on the rating.

*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; Consumer Products Rating Methodology, 31 October 2025) are available on 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 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 scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA):registers.esma.europa.eu/cerep-publication/. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at 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 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 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: the Rated Entity, the Rated Entities' Related Third Parties 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: 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 22 January 2021. The Credit Ratings/Outlook were last updated on 15 May 2025.

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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