MARKET SIGNALS 07.14.2020

MARKET SIGNALS 07.14.2020

Today we will look at one debt security as investment ideas for this week: Moscow Domodedovo Airport

IDEA #1: Moscow Domodedovo Airport

The information that the Russian Federation plans to partially resume international flights from July 15, prompted us to pay attention to the issues of Moscow Domodedovo Airport. On July 3, Moody’s confirmed the issuer rating at Ba1 with a “negative” outlook. The agency, therefore, completed a review of the ratings of the company, which it initiated on April 3 this year in the midst of an epidemic. Moody’s expects the company to continue implementing measures aimed at restoring its financial profile and maintaining good liquidity. According to Moody’s current estimates, the company’s credit indicators can recover to levels that correspond to the current rating level by 2022.

At the end of March, Fitch downgraded the issuer ratings from BB + to BB, noting that, despite the shock of 2020, the company Has sufficient liquidity to cover expenses in the next 12-18 months.

Given the industry, it is not surprising that the company’s Eurobonds were under significant pressure during the current crisis. For example, the issue price maturing in 2023 collapsed in March by more than 10 figures. Moreover, as can be seen in the chart below, in contrast to the EMUSTRUU index, which has already almost compensated for “conceivable” losses, the price recovery of the Eurobonds at Moscow Domodedovo Airport is far from being so active. The credit spread of the issue has expanded 2.5 times since February 25, 2020, which may be excessive.

Alexey Shternshis
Joint Managing Director
Capital Pi

https://capitalpi.fund/market-signals-200714

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