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Rating action

Scope Ratings GmbH (Scope) has today affirmed the BB- issuer rating of Tegeta Motors and assigned a Negative Outlook, resolving the under-review status. Concurrently, Scope has also affirmed the BB- senior unsecured debt rating.

The issuer has secured a GEL 250m bank credit line to provide backup coverage for the GEL 236m bond maturing in 2025, as refinancing is not expected until December 2025. The credit line, combined with break-even free operating cash flow, liquid inventory and available cash, fully covers all projected short-term debt obligations. Scope has consequently reverted its prior assessment of inadequate liquidity to adequate, resulting in today’s rating action.

The negative Outlook reflects the risk that the funding structure will not improve following the upcoming refinancing.

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). The business risk profile remains supported by the strong market share in Georgia and the high profitability but constrained by the company’s small size compared to European peers and its geographical outreach, limited to the Caucasian region.

Tegeta’s strategy of keeping high stock levels has afforded it the competitive advantage of being able to provide a quick delivery service. The company’s strategic geographical position and strong relationship with its major suppliers, among them Toyota, Volvo, Porsche, Man and JCB, have allowed it to retain its market share in the region. Tegeta has grown significantly, with revenue increasing by 119% over the last five years, thanks to the favourable economic trend in Georgia and continuous expansion into new brands and neighbouring countries. Nonetheless, with GEL 1,942m revenue in 2025 (EUR 611m, 18.7% increase YoY), Tegeta, whilst large in Georgia, is a small retailer compared to international peers. This limit potential benefits from economies of scale and increases the risk of volatile profitability.

Diversification is the weakest element of the business risk profile. The issuer's continued focus on Georgia and the Caucasian regions limits opportunities for reducing macroeconomic risk. While all products fall within the cyclical automotive category, Scope notes that the group partially mitigates revenue cyclicality. This is thanks to a historically high number of fleet deals with municipalities and corporates, as well as a significant portion of revenue (31% in 2024) from automotive parts and services.

Profitability is the key strength in Tegeta’s business risk profile assessment. With Scope-adjusted EBITDA margins* averaging 10% between 2018 and 2024, the issuer typically has stronger profitability than its peers. Following a slight decline to 10.9% in 2024 from 11.7% in 2023, Scope expects the EBITDA margin to further decline to around 9.6% and then remain at this level throughout the forecast period, driven by a higher cost of sales.

Financial risk profile: BB- (revised from B+). The continuous EBITDA growth has historically supported the financial risk profile and partially compensated for debt-financed acquisitions and high capex.

Scope projects leverage, measured by debt/EBITDA, to range between 3x and 3.5x over the next three years. Although debt will be slightly higher in 2025 (due to a new loan for a project in Gezi and the refinancing of maturing bonds), EBITDA growth in the medium to long term will offset this increase.

Interest coverage is expected to slightly reduce in 2025, constrained by new debt issuance, but should remain at around 3x with the cost of debt anticipated to remain stable. Scope expects that consistent EBITDA growth will allow the issuer to keep debt protection adequate, leaving margins to tap for additional finance if needed.

Liquidity: adequate (revised from inadequate). The previous assessment of inadequate liquidity was due to a significant increase in two-year tenor bonds, which created a substantial wall of maturities. Internal funds will be insufficient to refinance these bonds, especially with projected negative or break even free operating cash flow.

The issuer plans to cover a GEL 377m debt repayment in 2025 (including GEL 290m in bonds, of which GEL 54m has been already refinanced in April 2025) with a new GEL 260m bond. However, this new bond will not be issued until December 2025. While the final terms of the new bond are still being agreed, the Group's primary objective is to extend the maturity profile of its debt, with an anticipated tenor of between three and five years for the new issuance. During this period, the issuer has secured a GEL 250m credit facility. When combined with internal liquidity sources (available cash and liquid inventory), this facility fully covers the upcoming debt repayment obligations.

While Scope still expects that the issuer can refinance the bond maturing in 2025, the additional credit line provides comfort that debt repayment obligations are covered for the next few years. Therefore, Scope has revised its liquidity assessment to adequate.

Supplementary rating drivers: credit-neutral (unchanged). Overall, supplementary rating drivers have no impact on this credit rating action.

Outlook and rating sensitivities

The Negative Outlook reflects the remaining risks and uncertainties of addressing the financing structure on a sustained basis, i.e. the possibility that refinancing upcoming maturities will result in new maturity walls in the short-to-medium term.

The upside scenario for the ratings and Outlook is:

• Addressing the financing structure on a sustained basis by improving and spreading out the debt maturity profile (longer loan tenors), thereby ensuring sustainable liquidity in the long term.

The downside scenario for the ratings and Outlook is:

• Inability to improve the financing structure.

Debt rating

Scope has affirmed the BB- rating of Tegeta’s senior unsecured debt. The recovery assessment is based on the liquidation value in a hypothetical default scenario in 2027. This results in GEL 1,113m of assets being available to creditors compared to GEL 344m of secured bank debt, GEL 418m of trade payables and GEL 400m of senior unsecured debt (assumed to be the outstanding bond in December 2027). Scope expects an above average recovery of the senior unsecured debt but notes the potential volatility in the company capital structure and the high sensitiveness of the recovery to advance rates and has therefore refrained from up notching the rating.

Environmental, social and governance (ESG) factors

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

All rating actions and rated entities

Tegeta Motors LLC

Issuer rating: BB-/Negative, affirmation

Senior unsecured debt rating: BB-, 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 Outlook, (General Corporate Rating Methodology, 14 February 2025; Retail and Wholesale Rating Methodology, 25 June 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 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 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: Claudia Aquino, Associate Director
Person responsible for approval of the Credit Ratings: Thomas Faeh, Executive Director
The Credit Ratings/Outlook were first released by Scope Ratings on 22 March 2019. The Credit Ratings/Outlook were last updated on 26 February 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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