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Company News

12 July 2006

АК&М rating agency assigned to “Terminal” OJSC a “B+” credit rating, outlook positive

АК&М rating agency assigned to "Terminal" OJSC - a company established by "Aeroflot" OJSC to realize the construction project of "Sheremetyevo-3" terminal - a "B+" credit rating, outlook positive. This means that "Terminal" OJSC has been considered among the borrowers with satisfactory creditworthiness. The risk of full or partial debt restructuring is low. The level of the company's creditworthiness is likely to increase in the future while the project on construction of the new terminal in Sheremetyevo airport is being realized.

The АК&М rating agency's report states that "Terminal" OJSC demonstrates complete professionalism of its management, supported by the current results of the company's work and the provided financial materials on the project.

The rating of efficiency of the management solutions is increased thanks to high quality of the project development, deep analysis on all the stages of performance and attraction of the leading experts. Close cooperation of "Aeroflot" OJSC with "MASH" OJSC, "Vneshtorgbank" OJSC and "Vnesheconombank" will increase reliability of both financial and commercial as well as production and engineering solutions with regard to the project.

Equity investments in the terminal of the largest Russian banks can create more favorable conditions for usage of the borrowed funds and for improvement of the company's financial stability. The very fact that the main shareholders of "Terminal" OJSC are financially sound, reputable companies which are highly interested in the project's successful realization is estimated as a positive factor.

It is emphasized in the rating agency's report that the analysis of the company's main prospective financial indicators reveals that "Terminal" OJSC shows high potential level of the debt load. This has been caused first of all by the character of the project's financing - the main part of the investments will be made in the form of long-term debt funds to be reflected in the high level of debt load, taking into account the considerable period of repayment. At that, the main prospective cash flows will be adequate to the volumes of the debt repayments, and the situation will be characterized by the uptrend in the future. The annual cash receipts since 2009 will exceed the cash outflow, connected with the redemption and servicing of the obtained credits.

Heavy reliance on macroeconomical factors and demand for services have been considered as risk factors. The company's main incomes directly depend on the demand for transportation services. Besides, the traffic flow indicators are characterized by a high degree of volatility. As a large portion of the consumer services rendered in Sheremetyevo-3 terminal will be indented for the citizens of the Russian Federation, the demand for air tickets will, to a large degree, be dependent on the macroeconomical environment in the country and on the personal income level. Decrease of the public welfare against the background of dampening of the economic activity in the companies, using the services of air carriers, can cause the falling demand for transportation services and, as a consequence, to the falling demand for the services offered by Sheremetyevo-3 terminal. The economic growth in the Russian Federation, in its turn, is governed at a large extend by the development of prices for raw materials in the world commodity markets.

According to АК&М, the company also demonstrates potentially high currency risks, as well as the risks connected with the currency exchange regulation, as the terminal is going to cooperate with many foreign airline companies and foreign passengers and, as a consequence, will have to use different world currencies in its operation. As the main portion of the company's income will be denominated in foreign currency, whereas the expenses will be denominated in rubbles, the cash flows will depend on the process of the exchange rate formation in the currency market.

According to Director General of "Terminal" OJSC Kirill Budaev, the rating shows the confidence of the financial community in the company, as well as the project's potential.

It has been reported earlier, that December 30, 2005 "Aeroflot" OJSC and "Terminal" OJSC signed the memorandum of understanding with "MASH" OJSC, "Vneshtorgbank" OJSC and "Vnesheconombank" OJSC, which stipulated that the participation of the banks in the project would consist in extension of financial resources for the project to the amount of 475 million USD for the 13-year period. In June 2002 "Aeroflot" OJSC entered into contracts with "Vneshtorgbank" OJSC and "Vnesheconombank" OJSC stipulating that VTB purchased the share of 25% plus one stock in "Terminal" OJSC, whereas the share of 20% minus two stocks was purchased by VEB. Besides, the banks were going to grant a credit line to "Terminal" OJSC according to the credit agreements signed on the conditions stipulated in the Memorandum.

"Terminal" OJSC is a company established to realize the construction project of a new terminal city in Sheremetyevo airport, which is known as Sheremetyevo-3. The new terminal is going to realize the concept of "hub" (a transfer point) and will allow to improve considerably the quality of the passenger and airline service as well as to increase the traffic capacity of the Moscow airport node in the conditions of the increasing passenger traffic. The construction of Sheremetyevo-3 terminal will be completed in 2007. 2008 the passenger traffic is likely to achieve the scheduled level - 11 million passengers per annum; by 2010 the figure will amount to 11 million.

Sheremetyevo-3 terminal, which will meet all the modern European standards, will allow to integrate all the regular flights in Sheremetyevo airport and considerably increase thereby the demand for transfer flights as well as to optimize both the network routing and the service maintenance for Aeroflot and for other client-airlines.