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Rating action

Scope Ratings GmbH (Scope) has today affirmed the issuer rating on Hungarian household paper goods producer Vajda-Papír Kft. (Vajda-Papír) at B+ and revised the Outlook to Negative from Stable. Further, Scope has affirmed Vajda-Papír’s senior unsecured debt rating at B+.

The Negative Outlook follows Vajda-Papír’s announcement of a large investment programme to be financed through a mix of internal cash flow, state support and substantial bank debt. The programme is aimed at improving efficiency, expanding production capacity and reducing reliance on external energy sources. However, Scope expects the programme to also materially increase leverage, which could weigh on the company’s financial resilience over the medium term in the event of elevated input cost volatility.

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+ (revised from BB-). The revised assessment reflects persistent EBITDA volatility stemming from continued input cost fluctuations. Vajda-Papír remains a leading player in Hungary’s household paper market, with an estimated 25% share, and benefits from moderate geographic diversification, with exports accounting for over 50% of revenue. The consolidation of Vajda-Papír Scandinavia has enhanced the group’s scale and profitability. Nevertheless, the business risk profile is constrained by the issuer’s relatively small size, limited product diversification, weaker brand strength compared to peers and historically volatile margins.

Market conditions have improved over the past two years, with input costs, particularly for cellulose and energy, normalising from 2022 peaks. This supported a rebound in the Scope-adjusted EBITDA margin* from 2% in 2022 to 19% in 2023 and 13% in 2024, aided by in-house base paper production reducing reliance on external suppliers and supporting margin stability. Scope expects margins to moderate to around 11%, reflecting shifting consumer preferences toward private-label products and continued input cost volatility.

Financial risk profile: B+ (unchanged). The group’s financial standing markedly improved during the last two years after the integration of Vajda-Papir Scandinavia in late 2023 and following the stabilisation of input raw materials and energy prices. The integration of the Scandinavian subsidiary had a full impact on the income statement only in 2024, positively impacting credit metrics, as balance sheet positions were fully integrated already in 2023.

Despite the lower EBITDA margin in 2024 driven by the rebound of cellulose pulp prices from prior year lows, leverage increased only modestly in 2024 to 3.5x from 3.3x in 2023 due to deleveraging in the absence of significant capex. Cash flow cover turned slightly positive in 2024 (1% vs -57% in 2023), driven by the absence of significant capex. Interest cover remained solid at 8.5x in 2024 (6.2x in 2023) thanks to the low fixed interest rates on the issuer’s bonds.

Looking ahead, the company plans substantial investments of around HUF 35bn to enhance efficiency, expand capacity, introduce new product lines and reduce energy reliance on third-party suppliers. These investments will elevate debt. As a result, Scope projects that debt/EBITDA will rise to close to 5.0x in 2026 before stabilising at around 4.0x in 2027. Similarly, Scope expects cash flow cover to turn negative in 2025-2026 due to elevated capex before returning to positive levels in 2027 following the completion of the investment cycle. Scope notes that the investment programme should support profitability over the medium term, although the exposure to volatile input costs will persist in the absence of changes to the company’s hedging policy.

Liquidity: adequate (unchanged). The assessment is backed by the ample cash and cash equivalents supplemented by available overdraft and factoring lines totalling HUF 1.7bn. Cash and cash generation are forecast to fully cover the HUF 2bn of bank debt maturing in 2025. In 2026, cash and cash equivalents will temporarily fall as the company will fund its vast investments from own funds, negatively impacting liquidity. However, the liquidity assessment will remain positive as much of the funding for the capex programme has already been secured or is in advance negotiation stages.

Scope notes that Vajda-Papír’s senior unsecured bonds issued under the Hungarian National Bank’s Bond Funding for Growth Scheme include a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 11.2bn and HUF 9.9bn) if the debt rating of the bonds stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 30 days). Such an event could adversely affect the group’s liquidity profile. The current rating headroom to entering the grace period is zero notches, underscoring the need to maintain at least the present credit quality to avoid triggering the covenant.

Supplementary rating drivers: credit-neutral (unchanged). The ratings remain unaffected by supplementary rating drivers. Scope notes, however, that the reliability of the business plan is somewhat limited, as forecasting is hindered by the group’s insufficiently structured hedging practices.

Outlook and rating sensitivities

The Negative Outlook reflects Scope's expectation that current investment plans will yield significant increases in leverage, accentuating the company's underlying cash flow exposure to volatile input prices.

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

1. Reduction in fundamental cash flow volatility
    
2. Debt/EBITDA sustained at below 5.0x during the investment cycle

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

1. Adverse developments in performance which would further negatively impact profitability, metrics, or liquidity
    
2. Deterioration of debt/EBITDA to 5.0x or higher

Debt ratings

Scope has affirmed the senior unsecured debt rating at B+, in line with the issuer rating. Scope’s recovery analysis assumes a hypothetical default scenario in 2026, based on the estimated liquidation value of the group’s assets and assumed outstanding senior unsecured debt of HUF 17.9bn, including fully drawn available overdrafts. Despite an estimated ‘above-average’ recovery, the senior unsecured debt rating is aligned with the issuer rating to reflect the anticipated increase in indebtedness over the coming period.

In November 2020, Vajda-Papír issued a HUF 11.2bn senior unsecured bond (ISIN: HU0000359989) followed by a second HUF 9.9bn senior unsecured green bond (ISIN: HU0000360474) in May 2021, both under the Hungarian Bond Funding for Growth Scheme. The bonds are guaranteed by VAJDA REAL ESTATE Kft., a company within the issuer’s corporate group.

The bond proceeds were allocated to loan refinancing, investment capex aimed at expanding base-paper production, and working capital financing. Both bonds have tenors of 10 years and fixed coupon rates of 3.5%. The bond repayment schedule is the same for the two bonds: in six instalments with 10% of the principal value due annually from the fifth year and a balloon payment of 50% at maturity. Amortisation begins in 2025 for the first bond and 2026 for the second. In addition to the rating deterioration covenants, the bond covenants include non-payment, insolvency proceedings, cross-default, pari passu, negative pledge, change of control and dividend payment restrictions.

Environmental, social and governance (ESG) factors

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

All rating actions and rated entities

Vajda-Papír Kft.

Issuer rating: B+/Negative, Outlook change

Senior unsecured debt rating: B+, affirmation

The rating was prepared following Scope’s Consumer Products Rating Methodology, 31 October 2024. The application of the Consumer Products Rating Methodology, 31 October 2025, does not have an impact on the rating.

 *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; Consumer Products Rating Methodology, 31 October 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 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 Outlook and the principal grounds on which the Credit Ratings and 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: Dániel Szebényi, Director
Person responsible for approval of the Credit Ratings: Karl Yuan Pettersen, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 28 October 2019. The Credit Ratings/Outlook were last updated on 1 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
© 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.