Rating action

Scope Ratings GmbH (Scope) has taken the following rating action on the instrument issued by Special Employee Partial Ownership Plan Organization No. II of OTP Employees (OTP KMRP II):

OTP KMRP II 2031 Bonds (ISIN: HU0000361118), HUF 100bn: upgrade to BB- from B

The latest information on the ratings, including rating reports and related methodologies, is available on this LINK.

The rating action considers the transaction reporting available until 31 August 2025 and the stock price of 15 September 2025.

Key transaction features

The transaction finances the acquisition of a portfolio composed exclusively of (i) OTP Bank Plc ordinary shares and (ii) Hungarian 10-year government securities. The transaction facilitates the financing of an employee-backed investment scheme in OTP Bank according to a dedicated national law (the KMRP or SESOP law) using special purpose vehicles (the KMRPs) where membership is restricted to employees and management of a company.

The OTP KMRP II owns currently 6.8m shares of OTP Bank, HUF 5.14bn Hungarian bond HU0000404744 notional and other liquid instruments.

The rated bond is guaranteed by MFB, the Hungarian Development Bank Pr. Ltd. (MFB), for 80% of its outstanding notional amount. The guarantee is unconditional, irrevocable and the guarantor will pay on the first written request by the noteholders.

The two main parties to the transaction are:

• OTP Bank Plc. with an assigned issuer rating of BBB+, and
   
• MFB Hungarian Development Bank Private Limited Company with an assigned issuer rating of BBB.

The different costs of the structure, including bond interest, guarantee costs and operating fees will be paid out of (i) the dividend paid by the OTP Bank Plc. shares, (ii) the interest earned on the government securities, (iii) a potential subsidy by OTP Bank Plc. as allowed under the SESOP law, (iv) sale of the government securities or (v) sale of the OTP Bank Plc. shares themselves.

At or before the maturity date, the assets of the issuer will be liquidated or acquired by the members of OTP KMRP II to redeem the rated notes.

Relevant changes to the key transaction features

The OTP share price has increased by 54.3% from closing, available liquid assets provide about 2.6x coverage of annual bond coupon, guarantee and transaction costs (was about 1x at closing) and the lifetime costs of the transaction have reduced to 50% of the closing amount through passage of time.

Rating rationale

The rating action follows: i) the periodic re-assessment of the transaction´s key rating drivers, ii) a review of its key assumptions, considering the observed performance of the issuer’s assets and Scope’s economic outlook, and iii) any material changes to the key transaction features such as asset composition, structural features or counterparties.

The bond’s current rating reflects the updated quantitative analysis base case results. incorporating the substantially improved collateralisation of the bond as a result of the OTP stock price recovery and the purchase of additional shares. Moreover, the bond benefits from the better lifetime liquidity coverage, i.e. the required liquidity is fully available, and as a result of transaction seasoning the lifetime costs of the transactions have decreased to 50% of what was required at closing.

Key counterparty exposures remain unchanged both in terms of names and the respective credit quality profiles.

Key rating drivers:

The key rating drivers have evolved since the last rating action release 8 November 2024. Scope has made the changes listed below to the transaction’s the key rating drivers. Other drivers remain unchanged.

Collateralisation value (positive)^1,2,3. The substantial stock-price increase and the improved liquidity position provide buffers against adverse market evolutions. The punitive scenario of a requirement to sell stocks to cover costs is now less likely.

None of the key rating drivers are ESG related.

Key quantitative assumptions

• Price of OTP stock 28,850
   
• Stock price volatility 45%
   
• Dividend yield 3.0%

Updates to these assumptions and other parameters are provided under the section ‘Quantitative analysis.’

Key data sources

Scope’s review was based on servicer, investor and payment reporting as of August 2025.

Rating-change drivers

A change to the key quantitative assumptions based on observed performance or new data sources, significant changes to the key transaction´s features, and a change in Scope’s credit views regarding the key rating drivers could impact the ratings.

Sensitivity analysis

This analysis is solely intended to illustrate the sensitivity of the credit rating to the assumed parameters and, all else being equal, is not reflect expected or likely scenarios.

The following shows how the quantitative results change when the OTP Bank Plc. shares volatility assumption is 67.5%:

• sensitivity to volatility, one notch.

Quantitative analysis

Scope has performed a cash flow analysis considering the asset characteristics and the main structural features. Our quantitative analysis reflects the transaction’s strong reliance on both the guarantee, the dividend payments, and the final value of the shares. We derived the note’s loss rate distribution from a Monte Carlo simulation of the entire structure, incorporating both revenues and costs of the issuer.

One key parameter assumption is the volatility to be assumed for our diffusion of the value of shares, where share’s returns do follow a normal distribution, in a similar fashion as in the Black & Scholes model. We looked at historical volatilities either on OTP Bank Plc. itself or on peer companies (either the largest European banks or smaller CEE banks) over different horizons: one day, one year, or ten years (duration of the transaction). Several levels of volatilities were tested but the assumption corresponding to the assigned rating is 45%, a level which is (i) in line with short-term historical volatilities and (ii) above the long-term historical volatility. The dividend yield assumed for the duration of the transaction has been defined as a discounted yield corresponding to 50% of the expected dividend yield as derived from equity analysts’ consensus.

Rating driver references
1. Issuer documentation and supporting material (Confidential)
2. OTP Bank share information 
3. OTP Bank AGM 

Stress testing
Stress testing was considered in the quantitative analysis by considering scenarios that stress factors like volatility and dividend yield assumptions, contributing to sensitivity of Credit Ratings and consider the likelihood of severe collateral losses or impaired cash flows. The impact on the rated instruments is weighted by the assumptions of the likelihood of the events in such scenarios occurring.

Cash flow analysis
Scope Ratings performed a cash flow analysis of the transaction with the use of a bespoke tool checked by a dedicated team, incorporating relevant asset assumptions and taking into account the transaction’s main structural features, such as the asset composition, the instruments’ size and coupons. The outcome of the analysis is an expected loss rate and an expected weighted average life for the instruments based on the generated cash flows.

Methodology
The methodologies used for this Credit Rating, (General Structured Finance Rating Methodology, 13 February 2025; Counterparty Risk 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.

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 Rating: public domain, the Rated Entity, the Rated Entities’ Related Third Parties, 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 the Credit Rating 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.
Scope Ratings has not received a third-party asset due diligence assessment/asset audit. Scope Ratings has performed its own analysis of the data quality, based on information received from the Rated Entity or Related Third Parties, which is not and should be not deemed equivalent to the performance of due diligence or an audit. The internal analysis was considered when preparing the Credit Rating and it has no impact on the Credit Rating.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Rating and the principal grounds on which the Credit Rating are based. Following that review, the Credit Rating was not amended before being issued.

Regulatory disclosures
The Credit Rating is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Rating is UK-endorsed.
Lead analyst: Sebastian Dietzsch, Senior Director
Person responsible for approval of the Credit Rating: Antonio Casado, Managing Director
The final Credit Rating was first released by Scope Ratings on 8 December 2021. The Credit Rating was last updated on 8 November 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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