Moody’s assigns first-time A3 rating to Cesky Aeroholding, outlook negative

By bne IntelliNews May 22, 2014

Moody’s Investor Services has assigned a first-time issuer rating of A3 and a National Scale Rating of Aa1.cz to Czech state-owned airport and airline group Cesky Aeroholding. The outlook on the ratings is negative, Moody’s said in a statement.

The A3 rating reflects Cesky Aeroholding’s stable cash flows supported by its monopolistic position as the owner of Prague Airport and its very strong financial profile, which Moody's expects will be resilient to the impact of the construction of a new runway. Moody’s also cited Cesky Aeroholding’s competitive aeronautical charges and its ability to raise them without major regulatory or contractual impediments as well as the relatively high proportion of revenues from activities that are not directly related to the operation of the Prague airport as the reasons for assigning the A3 rating.

The negative outlook reflects the uncertainty regarding the future composition of the group.

Cesky Aeroholding was set up several years to be the umbrella group for state-owned companies active in the aviation sector. The group owns Prague airport operator Letiste Praha and has a majority share in flag carrier CSA. The group currently holds a 53.74% stake in CSA but it will likely cut its share to 19.74%, given that Korean Air, which acquired a 44% stake in the airline in 2013, has exercised an option to buy another 34% stake in the airline and to subsequently sell it to Travel Service, a private Czech airline. The latter transaction is subject to approval by several competition authorities.

Czech finance minister Andrej Babis has recently said that the state could float 30-40% Cesky Aeroholding on the Prague stock exchange in a bid to boost budget revenue.

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