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Rating action

Scope Ratings GmbH (Scope) has affirmed the B+/Stable issuer rating of Hungarian real estate company Kopaszi Gát Zrt. (Kopaszi). Scope has also affirmed the company’s B+ senior unsecured debt rating.

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). Kopaszi’s business risk profile remains stable, reflecting its current project pipeline and cash flow visibility. Revenue generation continues to be supported by real estate developments and, to a lesser extent, recurring income from commercial assets that reduce market cyclicality.

Operations are fully concentrated in Budapest through the BudaPart mixed-use development, one of Hungary’s largest urban regeneration projects comprising 15 residential buildings, 10 office buildings and a hotel. This geographic concentration and reliance on a single cluster limit diversification and expose the company to local market dynamics.

The issuer’s competitive position is reinforced by a strong sales track record and robust pre-sale activity. The BRK project is 95% complete and 76% has been sold ahead of its Q1 2026 handover, while the BRJ project launched in Q1 2025 with a 42% pre-sale ratio. Residential projects continue to command premium pricing, reflecting strong demand for high-quality units in Budapest.

Further visibility stems from the current office development, under a forward-sale agreement with the Hungarian state valued at around EUR 650m. Construction is on schedule, with all six office buildings structurally completed and 75% of the purchase price already collected. Execution risk is mitigated by a fixed-price construction contract and phased handovers through to mid-2026.

Despite these strengths, Kopaszi’s reliance on BudaPart amplifies its sensitivity to timing and cost overruns, even with the strong contractual safeguards and advance payments. This concentration remains the main constraint on its business risk profile.

Profitability is highly volatile due to project timing. Scope-adjusted EBITDA* reached EUR 33m in 2024 following the successful exit of two residential projects with strong margins. In contrast, 2025 is a transitional year with no scheduled handovers, resulting in a forecasted EBITDA of EUR 8m, supported by rental income from retained assets. A sharp recovery is expected in 2026, driven by the completion of the BRK and office projects, with EBITDA forecast at around EUR 181m due to the company delivering exceptional margins on its projects.

Financial risk profile: B+ (unchanged). Kopaszi’s financial risk profile is supported by strong liquidity but constrained by leverage volatility and project-driven cash flows. Debt/EBITDA improved to 5.4x in 2024 but is expected to spike to 23x in 2025 before falling to 1.1x in 2026. Despite this improvement, leverage remains inherently volatile, averaging around 11x for 2025–2027 under stressed scenarios. The loan/value ratio remains supportive at 27% in 2025, aided by asset values that are expected to peak at EUR 722m.

As of September 2025, debt stood at around EUR 185m. Kopaszi maintains a favourable debt structure, with a 76% fixed-rate exposure (86% including hedges) and an average fixed interest rate of 6%, which mitigates interest rate volatility. Strong interest income from substantial cash balances further supports debt protection. EBITDA interest coverage is expected to weaken to 7.1x in 2025 due to limited earnings from project handovers but should improve significantly thereafter, driven by a near net interest position and a sharp recovery in EBITDA.

Cash flow generation remains structurally volatile due to the project-driven nature of real estate development, with inflows and outflows concentrated around completion and handover dates. Although 2025 is a development-heavy year, pressure on free operating cash flow has been mitigated by robust pre-sales for the residential projects – BRK is 95% complete and 76% pre-sold, while BRJ has reached 42% – and by advance payments for the office project, where 75% of the purchase price has already been collected, leaving only final instalments pending.

Liquidity: adequate (unchanged). Liquidity is underpinned by cash reserves of around EUR 170m as of end-June 2025 and around EUR 50m in undrawn credit lines. The company benefits from a back-loaded debt maturity profile, with the next significant repayment of EUR 37m due in 2026. Refinancing risk remains limited given Kopaszi’s robust liquidity position and proven access to funding.

Even if free operating cash flow turns negative in the coming years due to higher working capital requirements, committed investments are expected to be financed through a combination of internal resources and dedicated credit lines earmarked for specific developments. Liquidity management remains a key priority, reflecting the substantial cash flow needs associated with large-scale projects.

Scope notes that Kopaszi’s senior unsecured bond, issued under the Hungarian National Bank’s Bond Funding for Growth Scheme, includes a covenant requiring accelerated repayment of the outstanding nominal amount (HUF 34. 5bn) if the bond’s rating remains below B+ for more than two years (grace period) or falls below B- (repayment within 60 days).Such an event could significantly pressure the company’s liquidity. The rating headroom before entering the grace period is zero notches, meaning the company must at least maintain its current credit profile to avoid triggering this covenant.

Supplementary rating drivers: credit-neutral (unchanged). Supplementary rating drivers have no impact on the issuer rating.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that Kopaszi will maintain adequate liquidity and successfully complete its development pipeline, including its planned office and residential developments, which are scheduled for completion in 2026. These projects are expected to materially strengthen operating performance and credit metrics following a transitional year in 2025 with limited EBITDA. The Outlook assumes no significant delays in construction milestones, continued strong pre-sale activity, and stable market conditions.

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

1. A stronger business risk profile, driven by a significant increase in size. This scenario is currently considered remote.
    
2. Debt/EBITDA stabilising below 8x on a sustained basis.

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

1. Debt/EBITDA remaining well above 12x and not offset by a high pre-sale rate of above 90%.
    
2. Liquidity weakening, for example, due to reduced access to bank financing or higher-than-anticipated cash absorption from the execution of Kopaszi's development pipeline. This scenario is unlikely given the issuer's continued high level of cash.

Debt rating

The senior unsecured debt rating has been affirmed at B+, equal to the issuer rating. The recovery estimate is assessed as ‘superior’, but no uplift is granted due to the potential introduction of additional senior secured debt ranking ahead of the unsecured debt and the volatility of the capital structure on the path to default. Scope’s recovery analysis is based on a hypothetical default scenario at year-end 2026, assuming outstanding senior secured debt of EUR 54m, EUR 50m of undrawn facilities, senior unsecured debt of EUR 86m (bond), and senior secured payables of around EUR 17m.

In January 2022, Kopaszi issued a HUF 34.5bn senior unsecured corporate bond (HU0000361308) under the Hungarian Bond Funding for Growth Scheme. The amortisation schedule of the 10-year fixed-interest instrument assumes repayments of 10% of the face value annually from the fifth to ninth anniversaries, followed by a 50% balloon payment at maturity in 2032.

Proceeds from the bond were allocated to finance future developments, refinance the first-ranking mortgage-backed loan provided by EXIM Bank, and partially refinance the second-ranking mortgage-backed shareholder loan. The bond carries a fixed coupon rate of 5.75%.

Environmental, social and governance (ESG) factors

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

All rating actions and rated entities

Kopacz Gát Zrt.

Issuer rating: B+/Stable, affirmation

Senior unsecured debt rating: 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 Outlook, (General Corporate Rating Methodology, 14 February 2025; European Real Estate Rating Methodology, 2 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 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: Michel Bove, Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 19 January 2022. The Credit Ratings/Outlook were last updated on 12 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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