Hungary's largest fertiliser producer Nitrogenmuvek is proposing a 2-3 year delay to bondholders in repaying the $200mn corporate bonds due to mature in May 2025, financial website Portfolio.hu writes, citing Bloomberg as the source.

Strategic director Zoltan Bige, the son of owner government critic Laszlo Bige, told the news agency that while the company faces financial challenges stemming from the CO2 tax, high energy prices and competition from Russian and Belarusian fertilisers, it is still committed to full repayment and is not considering a haircut.

However, the pricing of the bond, trading at 67 cents, implies that the market is pricing in a significant haircut after S&P Global Ratings downgraded the company’s credit rating to 'CCC-' with a negative outlook due to financial troubles.

Bige said negotiations are already underway with some bondholders, and creditors will have 21 days to respond once they officially receive the offer.

Nitrogenmuvek has appointed Lazard Inc. for financial advisory and Linklaters LLP for legal advisory services. 

In addition to operating in an unfavourable market environment, Hungary's sole fertiliser manufacturer, established in 1931, has been subjected to targeted government actions and retaliatory regulations, including the imposition of a retroactive carbon tax, but the company's owner is also embroiled in a legal battle to clear his name in a cartel case.

Bige alleged that he faced threats and harassment from state authorities in an attempt to pressure him into selling his company below the market price to oligarchs with close ties to the government.

This could probably be connected to the political stance of the 67-year-old entrepreneur, who was indicted a day after he announced to endorse opposition parties in the 2022 election campaign.

In an interview, the billionaire claimed that his criticism of the government led Viktor Orban to personally interfere in decisions impacting his company's future.

Nitrogenmuvek scaled back production in 2023 after the government retroactively slapped carbon dioxide emitters with a CO2 tax of €40 per tonne and a 10% transaction fee for selling quotas. In October 2023, the tax rate was revised to €35, but the transaction fee was raised to 15%. The carbon tax resulted in an immediate loss of €16.5mn for 2023.

The CO2 tax and the increase in hydrocarbon stocking fee pushed the company's operation to the red in 2023, a HUF22bn (€55mn) loss reversing from a net profit of HUF32bn in the preceding year as revenues tumbled.

The businessman is also fighting in court to prove his innocence in a cartel case, after being slapped with a record HUF11bn fine by the competition watchdog GVH. He was placed under house arrest in 2020 and faced charges of selling fertiliser at below-the-counter prices and then sharing the proceeds, an allegation refuted by Bige.