MALEV: modeFinance Credit Report

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modeFinanceTM HeadquarterBuilding A - AREA Science ParkPadriciano 99 - 34149 Trieste - ItalyPh.: +39 040 375 5337Fax: +39 040 375 [email protected]

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MALEV Hungarian AirlinesLtd. MALEV Ltd.Friday, 03 February 2012

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D C CC CCC B BB BBB A AA AAA

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D C CC CCC B BB BBB A AA AAAnot

available

non return extremlypathological

pathological highdanger

weak sufficient adequate good very

strongextremely

strong

Company name MALEV Hungarian Airlines Ltd. MALEV Ltd.

Identification number

Country Hungary

ZIP code and city 1097 - BUDAPEST

Address Konyves Kalman krt. 12 - 14.

+36 1 2353535

www.malev.hu

[email protected]

Legal form Limited liability company

Account Consolidated

Incorporation date 1992

NACE 2 Sector 5110 - Passenger air transport

Listed

Status Active

MORE Credit limit Not eligible for credit on the base of the available informations

31/12/2010 31/12/2009 31/12/2008

Turnover (th e) 385,107 434,185 563,890

Rating C C C

Probability of default 42.00% 42.00% 42.00%

Confidence Level 100% 100% 100%

Solvency ratios

Leverage ratio -2.33 -1.64 -2.35

Total asset/Total liabilties 0.57 0.39 0.58

Liquidity ratios

Current Ratio 0.63 0.33 0.38

Quick Ratio 0.57 0.29 0.33

Profitability and economic equili-

brium ratios

Return on investement ROI (%) -46.72 -72.00 -35.27

Return on equity ROE (%) -69.84 -52.25 -55.97

Asset turnover 2.04 3.18 3.65

Interest paid weight -0.13 -0.14 -0.18

EBITDA/Sales -0.20 -0.16 -0.06

Interest Coverage ratios

EBIT interest coverage ratio -7.21 -6.02 -4.60

EBITDA interest coverage ratio -6.63 -5.17 -3.36

Analysis and trend of financial

strength


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modeFinance TM srlVAT number [email protected]

Area Science Park,Padriciano 99. 34149 Trieste, ItalyTel. +39 040 3755337Fax +39 040 3756741

Sector Analysis

Company Healthy Balanced Vulnerable Risky

Solvency ratios

Leverage ratio -2.33 0.56 2.40 4.74 -1.92

Total asset/Total liabilties 0.57 2.77 1.42 1.17 0.92

Liquidity ratios

Current Ratio 0.63 2.35 1.28 0.88 0.67

Quick Ratio 0.57 2.02 1.17 0.79 0.59

Profitability and economic equilibrium ratios

Return on investement ROI (%) -46.72 20.00 6.39 1.05 -19.55

Return on equity ROE (%) -69.84 23.37 10.40 -7.60 -108.80

Asset turnover 2.04 1.66 1.32 1.00 1.33

Interest paid weight -0.13 0.00 0.17 0.13 -0.10

EBITDA/Sales -0.20 0.15 0.08 0.04 -0.08

Interest Coverage ratios

EBIT interest coverage ratio -7.21 331.80 4.60 0.03 -8.53

EBITDA interest coverage ratio -6.63 231.80 7.83 1.65 -5.78

Cash Conversion Cycle (days)

Days Sales Of Inventory (DIO) 8 14 8 11 7

Days Sales Outstanding (DSO) 24 34 33 33 33

Days Payable Outstanding (DPO) 51 12 27 37 48

Cash Conversion Cycle (DIO + DSO - DPO) -19 36 20 9 -6

Numer of analyzed companies - 70 279 227 145

(Average) Rating C A BB B CC

The sector has been chosen according to:

international companies in the sector NACE 2 5110 with financial data of year 2009.


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Sector Analysis - Graphs


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Balance Sheet

BALANCE SHEET (th e) 31/12/2010 31/12/2009 31/12/2008

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate HUF - EUR 3.587E-03 3.691E-03 3.824E-03

Total assets 167,658 120,495 139,896

Fixed assets 86,760 45,412 62,689

Intangible fixed assets 1,410 1,885 2,680

Tangible fixed assets 66,444 42,899 58,284

Other fixed assets 18,905 628 1,725

Current assets 80,898 75,083 77,207

Stocks 7,972 8,411 9,040

Debtors 25,445 28,053 35,772

Other current assets 47,481 38,618 32,395

Cash & cash equivalent 29,791 13,048 8,363

Shareholders funds -125,900 -189,433 -103,344

Capital 1,489 1,476 13,766

Other shareholders funds -127,389 -190,909 -117,110

Total liabilities 293,558 309,927 243,240

Non current liabilities 164,677 80,739 39,096

Long term debt - - -

Other non-current liabilities - - -

Current liabilities 128,881 229,188 204,144

Loans - 23,399 29,770

Creditors 53,815 71,736 88,030

Other current liabilities - 134,053 86,344

Total shareh. funds & liab. 167,658 120,495 139,896

NET DEBT (th e) 31/12/2010 31/12/2009 31/12/2008

Short term debts - 23,399 29,770

Long term debt - - -

Cash & cash equivalent 29,791 13,048 8,363

Net debt - - -

31/12/2010 31/12/2009 31/12/2008

Working capital -20,398 -35,272 -43,218

Net Current Assets -47,982 -154,105 -126,937

31/12/2010 31/12/2009 31/12/2008

Days Sales Of Inventory (DIO) 8 7 6

Days Sales Outstanding (DSO) 24 24 23

Days Payable Outstanding (DPO) 51 60 57

Cash Conversion Cycle (DIO + DSO - DPO) -19 -29 -28


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Income Statement

INCOME STATEMENT (th e) 31/12/2010 31/12/2009 31/12/2008

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate HUF - EUR 3.587E-03 3.691E-03 3.824E-03

Sales 341,792 383,134 510,424

Revenues growth (%) -10.8 -24.9 -

Other revenues +/- variation in inventories and contract in progress + Fixed assets

own construction capitalized43,314 51,051 53,466

Operating revenue / turnover 385,107 434,185 563,890

Total costs 453,443 496,552 594,063

Costs growth (%) -9 -16 -

Service costs 368,881 396,026 481,706

Material costs 314 1,470 612

Costs of employees 84,248 99,057 111,744

EBITDA -68,337 -62,367 -30,173

Depreciation 5,970 10,160 11,123

EBIT -74,306 -72,527 -41,295

Financial P/L -14,332 -26,279 -17,019

Financial revenue 27,944 37,596 56,872

Financial expenses 42,276 63,875 73,891

Interest paid 10,302 12,055 8,979

P/L before tax -88,638 -98,806 -58,314

Extr. and other P/L 826 153 831

Extr. and other revenue 13,458 202 880

Extr. and other expenses 12,632 49 49

P/L before tax + Extr. and other P/L -87,812 -98,653 -57,483

Taxation 116 321 358

P/L for period -87,928 -98,973 -57,841

31/12/2010 31/12/2009 31/12/2008

Cash flow -81,958 -88,813 -46,719

Added value 12,708 22,619 74,363

31/12/2010 31/12/2009 31/12/2008

Number of employees 2,761 3,000 3,277


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Evolutions and trends


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Qualitative information

Full overview The company, with registered office located in Budapest, Hungary, is an airline primarily engaged in passenger

transport services. It is the national carrier of Hungary. The company also operates scheduled cargo and charter

services. The company is recognized as one of the leading airlines in Central - Eastern Europe. Its fleet comprises

six Boeing 737 - 600 NG (102 seats), seven Boeing 737 - 700 NG (119 seats), five Boeing 737 - 800 NG (three

with 180 seats, two with 160 seats), one Boeing 767 - 200ER (185 seats), one Boeing 767 - 300ER (229 seats),

five Fokker 70 (72 seats), and three CRJ 200 ER (50 seats). Throughout the winter period, the company operates

scheduled flights to 48 cities in 34 countries (71 cities in 38 countries when taken together with code - share

partner airlines). Its charter flights are conducted with Boeing 737 - 800 aircraft specially configured for charter

traffic and long - haul Boeing 767 200ERs. The company is a private firm which was incorporated in December

1992.

History Not available.

Primary business line Primarily engaged in passenger transport services.

Secondary business line Not available.

Main activity Services.

Secondary activity Not available.

Main products and services Passenger transport services.

Size estimate One of the leading airlines in Central - Eastern Europe.

Strategy, organization and policy Not available.

Strategic alliances Not available.

Membership of a network Not available.

Main brand names Not available.

Main domestic country Hungary.

Main foreign countries or regions Not available.

Main production sites Not available.

Main distribution sites Not available.

Main sales representation sites Not available.

Main customers Not available.


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Auditor/Advisor/Bank

name type address

Deloitte Könyvvizsgáló és Tanácsadó Kft. Auditor -

Gábor Gion Auditor -

MKB Bank Nyrt. Banker -

Citibank Europe Plc. Mo - i Fióktelepe Banker -

Board

name date of birth nationality function

dr. Janos Berenyi - - member of the board

Mr Zoltan Kamaras - - Member of the board of directors

Deloveri Anatoly - - Management member

dr. Marton Domonkos Schneller - - Management member

Sharehoders (the first twenty shareholders ordered by Direct %))

STATE OF HUNGARY Rating: -

Country ISO code HU Operating revenue (MIL $) -

NACE Rev. 2, Core code - Total Assets (MIL $) -

Direct % 95.00 Number of Employees -

Total % - Information date 2010/03

Address: Not available


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Subsidiaries (the first twenty subsidiaries ordered by Direct %)

AEROPLEX KÖZÉP - EURÓPAI LÉGIJÁRMU MUSZAKI KÖZPONT KORLÁTOLT

FELELOSSÉGU TÁRSASÁGRating: C

Country ISO code HU Operating revenue (MIL $) 54

NACE Rev. 2, Core code - Total Assets (MIL $) 45

Direct % - Number of Employees 650


AIR BUDAPEST CLUB LÉGIKÖZLEKEDÉSI SZOLGÁLTATÓ KORLÁTOLT FELELOSSÉ-

GU TÁRSASÁGRating: BBB





MALÉV GH FÖLDI KISZOLGÁLÓ KORLÁTOLT FELELÕSSÉGÛ TÁRSASÁG Rating: -



Direct % - Number of Employees -


MALÉV GH FÖLDI KISZOLGÁLÓ ZÁRTKÖRUEN MUKÖDO RÉSZVÉNYTÁRSASÁG Rating: BBB





MALEV PASSENGER SERVICE LIMITED LIABILITY COMPANY Rating: A





MALÉV AIR TOURS IDEGENFORGALMI ÉS SZOLGÁLTATÓ KORLÁTOLT FELELOS-

SÉGU TÁRSASÁGRating: CCC





PANNON AIR CARGO NEMZETKÖZI SZÁLLÍTMÁNYOZÓ ÉS VÁMÜGYNÖK

KORLÁTOLT FELELOSSÉGU TÁRSASÁGRating: BBB






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TRAVELPORT HUNGARY ÜGYNÖKSÉGI ÉRTÉKESÍTÉSI RENDSZERT SZOLGÁLTATÓ

KORLÁTOLT FELELOSSÉGU TÁRSASÁGRating: BB






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ASKMORE rating guide

General vision A credit rating is an opinion of the general creditworthiness of an obligor (issuer rating), or the creditworthiness of

an obligor in respect of a specific debt security, or other financial obligation (issue rating), based on relevant risk

factors.

The Multi Objective Rating Evaluation (MORE) model is essentially used to assess the level of distress of industrial

companies by using data included in financial statements.

The basic idea of the model is to analyze a set of financial and economic ratios in a predictive corporate bankruptcy

model with the purpose of creating a fundamental credit rating model for each industrial sector. Results of the

model are obtained by applying newly developed numerical methodologies, drawing together financial theory,

data mining and engineering design methodologies. The heart of MORE is a multi dimensional and multi objective

algorithm that produces a classification of each company, by taking into account any attributes (such as sector and

country) characterizing a firm.

The model gives the opportunity to assign a rating to a company even without considering a complete data analysis

and allows to process quality information. It induces a better understanding of a company’s strength and weakness

thanks to sophisticated data mining tools and taking into account the analyst knowledge.

The MORE rating vision is to look at the fundamental economics of the company. The main idea is to evaluate the

rating observing every aspect of the economical and financial behavior of the company: better is the equilibrium

between the different aspects, better will be the final rating.

This is done studying, evaluating and aggregating the most important sections of the financial and economic

behavior of a company such as: profitability, liquidity, solvency, interest coverage and efficiency.


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Rating scale

Rating class Rating macro class Assessment

AAA

Healthy

The company’s capacity to meet its financial commitments is extremely strong. The company shows an excellent

economic and financial flow and fund equilibrium.

AAThe company has very strong creditworthiness. It also has a good capital structure and economic and financial

equilibrium. Difference from AAA is slight.

AThe company has a high solvency. The company is however more susceptible to the adverse effects of changes in

circumstances and economic conditions than companies in higher rated categories.

BBB

Balanced

Capital structure and economic equilibrium are considered adequate. The company’s capacity to meet its financial

commitments could be affected by serious unfavourable events.

BBA company rated BB is more vulnerable than companies rated BBB. Furthermore the company faces major ongoing

uncertainties or exposure to adverse business, financial, or economic conditions.

B

Vulnerable

The company presents vulnerable signals with regards to its fundamentals. Adverse business, financial, or economic

conditions will be likely to impair the company’s capacity or willingness to meet its financial commitments.

CCC

A company rated CCC has a dangerous disequilibrium on the capital structure and on its economic and financial

fundamentals. Adverse market events and an inadequate management could affect with high probability the

company’s solvency.

CC

Risky

The company shows signals of high vulnerability. In the event of adverse market and economic conditions, the

company’s strong disequilibrium could increase.

CThe company shows considerable pathological situations. The company’s capacity to meet its financial

commitments is very low.

D The company has not any longer the capacity to meet its financial commitments.


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Fundamental Credit Rating Ratios

Analysis area Ratio Assessment

Solvency ratios

Leverage ratioThis measures the level of total liabilities of the company in comparison

with equity.

Assets to debtThis indicates company’s solvency. The company shows a level of deficit

when the value of this ratio is under one unit.

Financial ratios Fixed Assets coverage ratioThis is calculated only for holdings. It measures the capital structure i.e.

whether a company covers the fixed assets with long term capital.

Liquidity ratios

Current ratioThis measures whether a company has sufficient short-term assets to cover

its short-term liabilities.

Quick ratioThis compares current liabilities only to those assets that can be readily

turned into cash.

Profitability and economic ratios

Return on Investement(ROI)This measures the profitability of company investments without regard to

the way the investment is financed.

Return on Equity(ROE) This measures the profitability of the equity.

Asset turnover

This indicates the investments turnover with regards to sales. The level

assumed from the ratio depends on the sector in which the company

operates.

Profit margin This indicates the profitability of sales.

Interest coverage ratio Interest Paid coverage

This indicate the ability of the company to cover interest expenses through

the economic margins (Gross profit and EBIT) and through the cash flow

from operating activities.


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MORE Credit Limit, Probability of default and Confidence Level

MORE Credit Limit MORE Credit limit is the estimation of the amount of maximum credit that is possible to assign on a commercial

relationship with the analyzed company with an outlook of one year.

modeFinance used the following values associated with the company analyzed while computing the credit limit:

• Size;

• Years in Business;

• Average number of suppliers;

• Liquidity of the company and the comparison with its sector;

• The funds dedicated to be paid to suppliers;

• The likelihood that a company may pay its debts in the next 12 months (MORE Ratings).

The credit limit in this report is merely a suggested value of commercial credit limit calculated on the basis of annual

public data. This value should be reviewed by paying attention to the Confidence Level value and by using other

information such as other business information, news... etc; and private information such as the relationship with

client, history of payments, guarantees and the knowledge of the sector.

Probability of default e Confidence

Level

In addition to the MORE Rating, modeFinance also estimates the probability of default and provides a level of

confidence. The probability of default is the degree of certainty (in quantitative terms) that the company will go

into default.

As the probability of default is strongly affected by the economic climate that the company is operating in,

companies in the same MORE class will not necessarily have the same probability of default.

The MORE model can produce a MORE rating even if there is missing data by using an associated confidence level:

Confidence =

∑Available Information∑

Total Information

The level of confidence does not indicate financial confidence in the company. It is a reflection of the variations in

availability of financial data across Europe due to filing regulations and suggests the degree of financial detail the

MORE rating is able to take into account for each company.

For companies with fully populated records a confidence level of 100% would be applied: companies where no

financial data is provided, 0%. This puts the MORE rating in a context for the user and aids interpretation.


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Notes and disclaimer

NOTES The present analysis was based on the company available financial statements as provided by Bureau Van Dijk

Electronic Publishing - ORBIS database (lack of both Notes to financial statements and Report on operations).

DISCLAIMER All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any

form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of

the publisher modeFinance. The facts of this report are believed to be correct at the time of publication but cannot

be guaranteed. Please note that the findings, conclusions and recommendations that modeFinance delivers will

be based on information gathered in good faith from both primary and secondary sources, whose accuracy we

are not always in a position to guarantee. As such modeFinance can accept no liability whatever for actions taken

based on any information that may subsequently prove to be incorrect.

Contacts

Company modeFinance

Products MORE rating

Where AREA Science Park

34149 Trieste, via Padriciano 99 - ITALY

Info [email protected]

web www.modefinance.com

Phone +39 040 3755337

MALEV: modeFinance Credit Report

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