Hungary’s leading construction materials maker Masterplast is in talks with a major Hungarian lender to refinance its debt after a downgrade.

The company is seeking a one-time exemption from its earlier commitment and requests that the pending loan agreement and associated drawdowns may not be considered a breach of obligations. Bondholders are required to submit their votes using the attached ballot by November 30.

Scope Ratings downgraded the company’s bond rating to “CCC” and also placed Masterplast under review for a further downgrade. The downgrade was attributed to worsening credit metrics, driven by the prolonged weakness in the construction sector. 

A "CCC" rating is considered a "non-performing" instrument, financial website Portfolio.hu writes, reflecting concerns about the liquidity crisis.

Scope noted, however, that the "under review" status could be lifted if liquidity issues are resolved within four weeks.

Masterplast ranks as Europe’s second-largest and the world’s third-largest fiberglass mesh producer. With a direct market presence in nine foreign countries, the company operates production facilities in Serbia and Germany. Its ambitious expansion strategy has significantly increased its debt burden, coinciding with a downturn in demand. Masterplast is also pursuing two major projects in Hungary—a glass wool plant and a rock wool factory, both scheduled to commence operations in 2025.

The company had previously committed not to increase its total debt during the life of the bonds unless its net debt/ebitda ratio exceeded 3.5. However, the current ratio exceeds this threshold, and the new credit facility would further raise the company's debt level, likely keeping the ratio above 3.5 even after the credit line is utilized.,

The proposed credit facility aims to alleviate immediate liquidity pressure, with a possible credit line of up to €7.6mn for a three-year term, the company said. CEO Tibor David told Portfolio that talks are progressing well.

Masterplast closed 2023 with negative Ebitda (-€6.1mn) which bounced back to €3.5mn in Q1-Q3 and is set to reach €4.8mn for the full year. Management forecasts a sharp improvement by 2027, targeting €43.9mn, which would be a two-fold increase from the 2021 peak.