ACRA ASSIGNS BBB+(RU) TO DME HOLDING LLC, STATUS “RATING UNDER REVIEW: DEVELOPING” AND BBB+(RU) TO THE BOND ISSUES OF DOMODEDOVO FUEL FACILITIES, STATUS “RATING UNDER REVIEW: DEVELOPING”

The credit rating of DME Holding LLC (hereinafter, the Company, Group, Airport, or Domodedovo, or DME Holding) is based on the high assessment of the operational risk profile due to the strong market position and strong business profile, medium level of corporate governance, and the very high credit quality of the region where the Airport operates. The Company’s financial risk profile, in turn, is determined by the medium size of business, high leverage, low interest payment coverage, and the low liquidity assessment. It should be noted that in 2025, the Company’s liquidity position will be under pressure in view of the need to refinance a bond, which also has a restraining effect on the credit rating. At the same time, the rating is supported by high profitability and cash flow metrics. The status “Rating under review: developing” has been assigned due to a lawsuit filed by the Prosecutor General’s Office of the Russian Federation against the owners of the Airport. A number of provisional measures were applied to the Group’s companies as a result of the acceptance of the lawsuit for judicial proceedings (which until recently also included a ban on payment of bond coupons). At present, the Agency cannot give a definitive assessment of the risks related to the negative impact of the lawsuit on the Group’s creditworthiness.

DME Holding is a group of companies that owns and operates Domodedovo Airport, one of the largest airports in Russia in terms of passenger and cargo traffic. Previously, the parent company of the Group was DME Limited (registered in Cyprus), however, from October 2024, Russia-based DME Holding LLC has performed the functions of the parent company.

KEY ASSESSMENT FACTORS

The decline in passenger traffic puts pressure on the Company’s financial performance. In 2024, Domodedovo’s passenger traffic was 15.6 mln, having declined by 22% compared to 2023. The main reason for this decline is the waning air traffic of S7 Airlines (the Airport’s anchor carrier) due to difficulties in maintaining its fleet of foreign-made aircraft against the backdrop of current restrictions on the Russian aviation market and the development prioritization of the airline’s route network through regional airports. In ACRA’s opinion, due to the turbulent economic situation and sanctions pressure on the Russian aviation industry, the Airport’s passenger traffic will recover at a moderate pace (growth of 2% annually in 2025–2027). These air passenger traffic dynamics put pressure on the Company’s financial performance. The Agency estimates FFO before net interest payments and taxes at RUB 10.6 bln in 2024 (RUB 12.2 bln in 2023). Operational cash flow will be supported by an increase in airport charges and fees in the forecast period. ACRA also notes the effective management of the Company’s operating expenditures in previous years and expects the FFO before net interest and taxes margin to remain at 35–40% in 2025–2027.

High leverage and low interest payment coverage. As of December 31, 2024, Domodedovo’s financial debt of RUB 74.2 bln was represented by three bond issues (including ruble-denominated bonds, replacement bonds, and Eurobonds), and bank loans. ACRA expects the ratio of total debt to FFO before net interest payments to be within 4.0–6.0x in 2025–2027. The Company’s leverage is high. Given that about half of Domodedovo’s financial debt is represented by obligations denominated in foreign currency (replacement bonds and Eurobonds denominated in US dollars), the further dynamics of leverage will largely depend on the ruble exchange rate. The ratio of FFO before net interest payments to interest payments was 2.1x at the end of 2023. ACRA expects this indicator to weaken due to rising interest rates and a fall in the Company’s operational cash flow. According to the Agency’s estimates, the ratio of FFO before net interest payments to interest payments will decrease to 1.5–2.0x by the end of 2024 and remain in this range in 2025–2026.

High assessment of cash flow and weak liquidity position. A decrease in the Company’s operational metrics in 2024, increased interest expenditures and significant dividend payments had a negative impact on the free cash flow (FCF). However, ACRA expects the weighted average FCF margin to be consistently high (over 5%) in 2025–2027 on the condition that there are no dividend payments and capital expenditures remain at a relatively low level (due to the absence of plans to carry out major investment projects in the near future). At the same time, the Company’s liquidity position is under pressure, taking into account the upcoming repayment of the Company’s ruble-denominated bonds in 2025 against the backdrop of uncertainty related to the lawsuit filed by the Prosecutor General’s Office of the Russian Federation against the owners of the Airport, which is reflected in the status “Rating under review: developing”.

KEY ASSUMPTIONS

• The Airport’s passenger traffic to grow by 2% annually in 2025–2027;

• No dividend payments in 2025–2027;

• Annual average USD/RUB exchange rate at 95–105 in 2025–2027;

• Access to external liquidity sources to refinance the debt portfolio.

POTENTIAL OUTLOOK OR RATING CHANGE FACTORS

The “Rating under review: developing” status assumes a variety of trends: the rating may stay unchanged, be upgraded or downgraded.

Removal of the “Rating under review: developing” status and upgrade of the credit rating may be prompted by:

• Withdrawal of the lawsuit filed by Prosecutor General’s Office of the Russian Federation against the owners of the Airport, successful refinancing of short-term debt, and improvement of the Group’s leverage.

Removal of the “Rating under review: developing” status and affirmation of the credit rating may be prompted by:

• Maintaining the current ownership structure of the Company and withdrawal of the lawsuit filed by Prosecutor General’s Office of the Russian Federation against the owners of the Airport, coupled with no significant negative impact to the Group’s financial standing.

Removal of the “Rating under review: developing” status and downgrade of the credit rating may be prompted by:

• Deterioration of access to liquidity sources due to the continued uncertainty associated with lawsuit of the Prosecutor General’s Office of the Russian Federation against the owners of the Airport, or the implementation of a negative scenario in relation to the lawsuit, which could lead to deterioration in the Group’s operating or financial performance.

RATING COMPONENTS

Standalone creditworthiness assessment (SCA): bbb+.

Support: none.

ISSUE RATINGS

Rationale. The series 002P-01 (RU000A105MP6) and ZO28 (RU000A108Y11) bond issues are senior unsecured debt obligations of Domodedovo Fuel Facilities Ltd., which is an operational subsidiary of DME Holding LLC. The ratings were assigned to these issues on the basis of public irrevocable offers from the holding company’s key operational companies that generate the bulk of the Group’s cash flow. Due to the absence of structural and contractual subordination of the issues, ACRA ranks them equal to other existing and future unsecured and unsubordinated obligations of the Group in terms of priority. As per ACRA’s methodology, the recovery rate for the unsecured debt belongs to category I, therefore credit rating of the issues is set at BBB+(RU), i.e. on par with the credit rating of the Company.

KEY ISSUE PROPERTIES

1.         ISIN RU000A105MP6

2.         ISIN RU000A108Y11

Sources: ACRA, issuer’s data

REGULATORY DISCLOSURE

The credit ratings of DME Holding LLC and the bond issues (RU000A105MP6, RU000A108Y11) of Domodedovo Fuel Facilities Ltd., a subsidiary of DME Holding LLC, have been assigned under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Non-Financial Corporations Under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale for the Russian Federation was also applied to assign credit rating to the above bond issues (RU000A105MP6, RU000A108Y11) of Domodedovo Fuel Facilities Ltd.

A credit rating has been assigned to DME Holding LLC for the first time. The credit ratings of the bond issues (RU000A105MP6, RU000A108Y11) of Domodedovo Fuel Facilities Ltd. were published by ACRA for the first time on December 20, 2022 and September 23, 2024, respectively, and then withdrawn on February 20, 2025. The credit rating of DME Holding LLC and its outlook and the credit ratings of the bond issues (RU000A105MP6, RU000A108Y11) of Domodedovo Fuel Facilities Ltd. are expected to be revised within one year following the publication date of this press release.

The credit ratings were assigned based on data provided by DME Holding LLC, information from publicly available sources, and ACRA’s own databases. The credit ratings are solicited and DME Holding LLC participated in their assignment.

In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.

ACRA provided no additional services to DME Holding LLC and Domodedovo Fuel Facilities Ltd. No conflicts of interest were discovered in the course of credit rating assignment.