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Rating action

Scope Ratings GmbH (Scope) has today downgraded the issuer ratings on Envien Magyarország Kft. and Envien International Ltd. to B+ from BB-, maintaining the Negative Outlooks. Scope has affirmed the B+ rating on the HUF 5.5bn senior unsecured (guaranteed) bond (ISIN: HU0000360193).

The downgrade reflects a one-notch negative governance-related adjustment to the BB- standalone credit assessment. Persistent EBITDA pressure has weakened credit metrics, resulting in repeated covenant breaches on bank loans. The recurrence of such breaches, the reliance on retroactive waivers from financing banks and a complex structure with debt largely raised at subsidiary level underpin the negative adjustment.

The maintained Negative Outlook reflects the limited visibility on a sustained recovery in profitability and credit metrics, as well as the unresolved covenant breaches. However, waiver approval risks are mitigated by the issuer’s positive preliminary discussions with the lenders and its solid record of obtaining support, which suggest a good likelihood for a favourable resolution.

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). The assessment remains constrained by high commodity market volatility, limited production capacity within the EU, and the strong reliance on commodity products such as biofuels. Customer concentration also poses a risk, with over 50% of sales linked to one customer, MOL Group, though this is partly mitigated by the Biopaliwa acquisition and the group’s longstanding, synergistic partnership with MOL through Rossi Biofuels, a joint venture at MOL’s Hungarian site.

Profitability continues to be hampered by persistent sector volatility weighing on biodiesel and bioethanol margins. Based on H1 2025 results, profitability has come under greater-than-expected pressure from adverse market developments, including elevated feedstock prices amid poor harvests, higher ethanol imports (particularly from the US) and the depreciation of the US dollar against the euro. Reduced imports of waste input materials from Asia, following legislative changes, have further narrowed the used cooking oil (UCO) and used cooking oil methyl ester (UCOME) spread. Consequently, Scope has revised its projections, expecting an EBITDA* of around EUR 26m for 2025, roughly 50% lower than in 2024, with EBITDA margin falling to below 2.5% from 6.6%.

Scope sees only a limited recovery for profitability for 2026–2027, forecasting EBITDA at EUR 32m–38m and margins averaging around 3%. The agency believes the sector remains volatile, and ongoing pressure on biodiesel and bioethanol fundamentals (e.g. high imports outside of Europe and dollar depreciation) is likely to keep profitability under strain unless cost levels ease.

Credit strengths remain the group’s moderate market position and geographical diversification across several Central and Eastern European countries. Envien Group holds significant market shares in relatively protected markets, particularly Slovakia, where it meets national demand, as well as in Hungary, the Czech Republic and Poland. Strong ties with MOL Group and regulation-driven demand for biofuels remain supportive factors.

Financial risk profile: BB- (revised from BB+). The downward revision reflects weaker credit metrics than anticipated, particularly for debt/EBITDA. Sector and supply conditions also remain highly volatile, adding pressure on margins and prolonging uncertainty over the timing and sustainability of a meaningful recovery in credit metrics. The pending waiver approvals related to covenant breaches at certain subsidiaries introduce more risk. However, Scope expects a pragmatic resolution with the financing banks, supported by the early discussions with lenders, the group’s longstanding banking relationships, and its history of successful waiver approvals.

Under current conditions, Scope projects debt/EBITDA to peak above 10.0x at YE 2025, before gradually improving over the next two years, assuming only a modest recovery in EBITDA from 2025 lows. Nevertheless, the agency expects leverage to remain above 6.0x by 2027. Scope has not applied cash netting in its debt calculation. This is in line with its General Corporate Rating Methodology, which only allows netting for issuers rated in the BB category or higher.

Interim results for FY 2025 indicate some volatility in working capital, with significant cash inflows of around EUR 34m in the first six months, mainly driven by lower inventory levels. For the full year, Scope expects some normalisation of working capital, reflecting the usual build-up of feedstock storage (rapeseed and corn) during the harvest season. Nevertheless, the agency projects some positive contribution from working capital, supported by the company’s revised storage management policy. This underpins Scope’s forecast for the free operating cash flow/debt ratio of around 4%, expected to remain at a similar level over the next two years, reflecting ongoing margin pressure and assuming annual capex revised down to EUR 8m–10m.

Interest cover continues to support Envien Group’s financial risk profile. The agency projects EBITDA interest cover to range between 2.0x and 4.0x, gradually increasing over time assuming some recovery in margins. In 2025, net interest paid is expected to remain broadly in line with 2024 levels, with a gradual decrease anticipated over the following two years as debt is repaid.

Liquidity: adequate (unchanged). Envien Group’s liquidity is adequate, with the liquidity ratio expected to remain above 110% in 2025. Although the ratio is projected to fall below this threshold in 2026–2027, the agency maintains its adequate assessment, as short-term debt of around EUR 162m–165m over the forecast period mainly comprises drawn overdraft facilities of around EUR 142m (as of December 2024), which Scope conservatively projects to remain broadly stable.

In line with market practice in Slovakia and Hungary, Envien Group uses uncommitted short-term revolving overdraft lines with several relationship banks, featuring staggered maturities throughout the year to mitigate liquidity risk. Most of these facilities have been in place for years (some for decades) and are routinely rolled over, primarily to finance seasonal inventory needs. The company’s longstanding and stable banking relationships support continued access to and regular renewal of these facilities, underpinning Scope’s adequate liquidity assessment.

Scope highlights that Envien Magyarország’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 5.5bn) if the debt rating of the bond stays below B+ for more than two years (grace period) or drops below B-. Such a development could adversely affect the company’s liquidity profile. Given the current B+ rating on the senior unsecured bond and the Negative Outlook on the underlying issuer rating the rating headroom to entering the grace period has been exhausted, leading to a higher risk of the rating-related covenant being triggered. Nevertheless, Scope believes that the impact of such covenant being triggered on the issuer’s credit profile is mitigated by the relatively small size of the bond compared to the cash and cash equivalent levels of the group of EUR 61m as of September 2025.

Financial covenants apply at various subsidiary levels, although in recent years some have also been tested on a consolidated basis. At YE 2023 and YE 2024, certain subsidiaries breached bank covenants, which were subsequently fully waived. Based on management indications, three subsidiaries reported covenant breaches on a few bank loans as of the June 2025 testing date. One breach was already waived in September, while discussions with banks on the remaining waivers are ongoing and expected to conclude between October and November. Scope currently assumes no liquidity impact, as a positive resolution is highly probable based on the solid banking relationships, record of waiver approvals and management assurances. The agency will continue to monitor developments closely, also considering that ongoing pressure on EBITDA heightens the risk of further covenant breaches.

Supplementary rating drivers: - 1 notch (revised from credit-neutral). Scope views governance as a negative rating driver, resulting in a one-notch adjustment to the standalone credit assessment. This view is driven by the repeated retroactive covenant waivers in recent years, which indicate a reliance on retroactive measures and a limited scope for pre-emptive risk management regarding covenant compliance, increasing refinancing and waiver risks. This, combined with a complex corporate structure in which multiple entities raise debt with local banks and financial covenants are largely set at the subsidiary rather than at consolidated level, ultimately weighs on the issuer’s credit quality (ESG: credit-negative governance risk factor). Moreover, the agency sees Envien’s financial policy as somewhat ambitious, reflecting shareholder-friendly distributions and material M&A activity that may reduce headroom for financial flexibility during periods of weaker cash flow generation.

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

Outlook and rating sensitivities

The Negative Outlook reflects significant uncertainty regarding the pace of the company's operational recovery, as well as the ongoing pressure on credit metrics due to continued pressure on operating profitability. Furthermore, the Outlook takes into account the ongoing situation regarding unresolved covenant breaches on bank loans, although Scope assumes that support from financing banks will remain unchanged and that a pragmatic solution will be reached regarding waivers.

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

1. Continued support from financing banks and agreement on a pragmatic solution to covenant breaches are also key
    
2. Faster-than-expected recovery of EBITDA and EBITDA margin, with stabilisation of the EBITDA margin at 5% or higher
    
3. Stabilisation of debt/EBITDA below 5.0x and interest coverage above 3.0x on a sustained basis

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

1. Failure to obtain a waiver on breaches for bank loans, and deteriorating support from financing banks regarding the contraction of credit facilities, which could result in insufficient liquidity
    
2. Subdued recovery of the company’s EBITDA and EBITDA margin, with no stabilisation of the EBITDA margin at 5% or higher
    
3. Failure to stabilise debt/EBITDA below 5.0x and interest coverage above 3.0x on a sustained basis
    
4. Continuation of the shareholder-friendly financial policy

Debt rating

Envien Magyarország issued a HUF 5.5bn bond in 2021 under the Hungarian Bond Funding for Growth Scheme (ISIN: HU0000360193). The bond’s tenor is 10 years, maturing in May 2031. Envien International has provided an unconditional and irrevocable guarantee to the bond issued by Envien Magyarország, totalling HUF 6.1bn for the full value of the bond plus a contingency buffer to cover all costs incurred by Envien Magyarország. The bond is unconditional and unsubordinated, ranking as senior unsecured debt for Envien International.

Scope has affirmed the B+ rating on the senior unsecured (guaranteed) bond (ISIN HU0000360193), in line with the issuer rating. This is based on Scope’s recovery analysis, which indicates an ‘average’ recovery for the bond. The recovery is based on an expected liquidation value in a hypothetical default scenario in 2027.

Environmental, social and governance (ESG) factors

In line with the chemicals industry, Envien Group’s primary ESG considerations are environmental including pollution, raw material consumption, occupational safety and regulatory compliance, which Scope considers credit neutral overall.

The rating also reflects Scope's negative view of governance risk, as outlined above, given the limited pro-active risk management regarding covenant compliance paired with the complex corporate structure with debt raised and covenants set mainly at subsidiary level.

All rating actions and rated entities

Envien International Ltd.

Issuer rating: B+/Negative, downgrade

Envien Magyarország Kft.

Issuer rating: B+/Negative, downgrade

Senior unsecured (guaranteed) debt instrument rating (ISIN: HU0000360193): B+, 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 Outlooks, (General Corporate Rating Methodology, 14 February 2025; Chemicals Rating Methodology, 30 June 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 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 Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Herta Loka, Associate Director
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The issuers' Credit Ratings/Outlooks were first released by Scope Ratings on 24 March 2021. The Credit Ratings/Outlooks were last updated on 11 March 2025.
The final Credit Rating for the bond (ISIN: HU0000360193) was first released by Scope Ratings on 6 May 2021. The Credit Rating was last updated on 11 March 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
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.