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RAEX Revises Aeroexpress Rating Based on New Methodology and Assigns Carrier a ruBB+ Rating

Jun 9, 2017

The RAEX (Expert RA) rating company has revised the credit rating of the Aeroexpress non-financial company, based on new methodology, and has assigned it a ruBB+ rating (which corresponds to А(III) according to the previously applied scale). The outlook is stable. Earlier, the company had an А(III) rating with stable outlook.

The high profitability metrics that the carrier has been showing for the last three years has positively influenced the company’s rating. The return on assets and equity, calculated given the adjusted net income, is 10% and 25% correspondingly. The EBITDA margin amounted to 38%.

Moreover, the agency's analysts mark moderately high current and absolute liquidity ratios. As of December 31, 2016, the current and absolute liquidity ratios, computed with the adjusted asset value to balance sheet liabilities ratio taken into account, amounted to 1.4 and 0.3 correspondingly. All of the agency’s calculations allow for the fact that bonds that were held as of the reporting date were refinanced through a long-term loan.

The company’s contractors are highly diversified, both in terms of cost and income structures. The company’s key customers are individuals. They account for over 85% of the carrier’s total income. Besides, the agency has noted high information transparency, strong risk management regulation, and low currency risks.

A high leverage ratio, given current liabilities and total debt, puts pressure upon the rating. Off-balance sheet liabilities that exceed the balance sheet total by three times due to the leasing of double-deck trains has become the main reason for the low assessment of leverage metrics. In the next twelve months, including the leasing period, the debt/EBITDA and debt service coverage ratios will amount to 19 and 1.3 correspondingly. As of December 31, 2016, the stress liquidity indicator, calculated as a ratio of quality-adjusted assets and the company’s liabilities, is 0.2, which is estimated by the agency’s analysts as low.

They also consider a low projected liquidity ratio to be a deterrent. According to analysts, available liquid assets will make it possible to cover the company’s expenses over the next 18 months after December 31, 2016, including loan and leasing repayments, at a ratio of 1.1. The agency estimates the transaction flow dynamics as moderately positive. It expects that the recovered air traffic from Turkey and 2017 Confederations Cup games in Moscow will slightly drive passenger flow.

The agency also noticed the poor diversification of liabilities across creditors. As of December 31, 2016, the main creditor’s stake reached 90% of company’s total liabilities. Besides, the company’s rating is restrained by the lack of a supervising owner, which, according to the agency, may raise the risk of corporate conflicts.

Aeroexpress provides suburban railway passenger transportation services to passengers from the Moscow Air Cluster. As of December 31, 2016, according to company’s RAS (Russian Accounting Standards) reporting, Aeroexpress assets stood at RUB 12.4 billion. Its equity totalled five billion roubles, the company’s income in 2016 amounted to RUB 5.9 billion, and its net income added up to RUB 1.1 billion.