OREANDA-NEWS. Fitch Ratings says that the extension of the house arrest of the sole shareholder of Domodedovo Airport (DME) adds to the regulatory and political uncertainty embedded in DME's 'BB+' Long-term Issuer Default Rating, which is on Negative Outlook.

DME's sole shareholder Dmitry Kamenschik was reportedly detained by the Russian authorities in February 2016 on the grounds of being implicated in the terrorist attack in DME in 2011, together with one existing and two former DME employees. Even though the previous investigations into the case had been closed and the terrorists found and sentenced, the renewed investigation is based on the alleged non-compliance of the airport with the requirements for security equipment.

Fitch understands from DME's management that Mr Kamenschik was put under house arrest in February 2016, which was expected to last a few weeks. However, in mid-April the initial term of the arrest was extended to end-July 2016. Fitch expects that the investigation will be closed and a decision will be made by then, although delays cannot be ruled out.

In our initial rating report dated December 2013 we had noted the high level of political interference that can be exerted on DME. Regulatory and political uncertainty was always one of the factors that constrained the rating to speculative-grade.

No rating action has been taken so far following the arrest of Mr. Kamenschik as the airport continues to operate as normal and while the outcome of the investigation remains unknown. The opaque legal environment in Russia makes it difficult to predict the outcome and Fitch will continue to monitor developments.

SUMMARY OF CREDIT
DME Ltd is a group of companies that operates Domodedovo Airport - one of the three airports in Moscow. The group owns the terminal buildings and leases the runways and other airfield assets from the Russian government. Senior unsecured notes of USD300m were issued in 2013 by DME Airport Limited - a special purpose vehicle registered in Ireland that on-lent the proceeds to Hacienda Investments Ltd, a subsidiary of DME Ltd.

The Outlook on DME's rating was revised to Negative in October 2015 following the bankruptcy of Transaero and Fitch's expectation that the loss of Transaero's traffic will put additional pressures on the airport in the currently weak economic environment.