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 assigned a first-time preliminary rating of (P) BB- to the planned GEL 350m senior secured bond to be issued by Georgia Healthcare Group JSC (GHG). At the same time, Scope has withdrawn the preliminary (P) BB- rating previously assigned to the senior unsecured bond guaranteed by GHG’s subsidiaries. No action has been taken on the B+/Stable issuer rating for GHG.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Debt rating

GHG plans to tap the bond market with a first-time senior secured social bond issue (GEL 350m) in August/September 2025, to which Scope assigns a preliminary bond rating of (P) BB-. The bond will be secured by the company’s immovable properties, along with selected high-value medical equipment, with a total estimated value of approximately GEL 491m.

Scope’s recovery analysis is based on a hypothetical default scenario in 2027, which assumes no outstanding senior secured bank loans that rank senior to the senior secured bond. The analysis indicates excellent recovery expectations for the bond, taking into account a reasonable liquidation value at default of about GEL 416m after administrative claims. However, Scope has only provided one notch of uplift to the bond rating due to emerging market risk.

Issuer rating

GHG’s B+/Stable issuer rating remains unchanged, based on a BB- assessment for its business risk profile, a B assessment for its financial risk profile and a zero-notch impact from supplementary rating drivers.

The issuer rating is driven by the credit-positive characteristics of Georgia’s healthcare market. Resilience is supported by GHG’s leading market position, with an approx. 14% share by beds and an over 20% share of Universal Health Care (UHC) revenues, its strong national brand, and vertically integrated model. Scope views the recent growth in outpatient services, bed utilisation, and cost discipline as drivers of sustained operating efficiency. The Scope-adjusted EBITDA margin* is projected at above 20% in the coming years.

However, the issuer rating is constrained by GHG’s limited diversification, with full operational exposure to one country and one sector. The company also remains highly reliant on the state-funded UHC programme for revenues and is subject to political and regulatory risks. Financial risk remains pressured due to still-high leverage and constrained free operating cash flow, compounded by ongoing exposure to economic uncertainty in the Republic of Georgia (rated BB/Negative).

GHG’s indebtedness stems primarily from significant capex requirements to support its expansion and modernisation programme, which is central to maintaining market position and meeting regulatory and operational needs. While a portion of these funding needs has been met internally, the company has also relied on external financing. It is Scope’s understanding that the funds raised through the planned bond issue (GEL 350m) will be used to refinance existing loan obligations and to partially finance the company’s capital expenditure plans. Elevated capital expenditures and ongoing working capital requirements are expected to sustain pressure on free operating cash flow in the near term.

Some reassurance is provided by the company’s medium-term leverage target of net debt/EBITDA, well below 3x. This is supported by financial covenants outlined in the bond prospectus, which restrict dividend payouts, limit the incurrence of new debt and acquisitions, and impose maintenance covenants requiring the company to hold a minimum level of cash annually to cover financial charges starting in 2025. Additionally, a coupon step-up will apply if net debt/EBITDA exceeds 4x from January 2027.

Outlook and rating sensitivities

The Stable Outlook incorporates Scope’s expectation that credit metrics will remain at current levels, with debt/EBITDA of between 4.0x and 5.0x and an EBITDA interest cover of around 2x. The Outlook also reflects the gradual improvement of operations with the EBITDA margin improving to over 20%, which should support better credit metrics over time. The Outlook further incorporates Scope's expectation of full compliance with (financial) covenants.

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

1. Debt/EBITDA of below 4x on a sustained basis
    
2. EBITDA interest cover of above 2x on a sustained basis
    
3. Alleviation of concerns around debt refinancing risk

The downside scenario for the ratings and Outlook is:

1. Debt/EBITDA around or above 5.5x on a sustained basis

All rating actions and rated entities

Georgia Healthcare Group JSC

Issuer rating: B+/Stable, No action

Preliminary senior unsecured (guaranteed) GEL 350m bond rating: (P) BB-, Withdrawal due to cancelled debt instrument

Preliminary senior secured GEL 350m bond rating: (P) BB-, New

*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 methodology used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025), is 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, 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/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: Azza Chammem, Associate Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The issuer and preliminary senior unsecured bond Credit Ratings/Outlook were first released by Scope Ratings on 6 June 2025.
The preliminary senior secured bond Credit Rating was first released by Scope Ratings on 18 August 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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