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. Last Updated: 07/27/2016

Downgrade, S&P Review Add to Aeroflot's Woes

Already suffering from a bitter labor dispute, Aeroflot's woes continued Thursday as a major brokerage downgraded the company's shares and a leading global ratings agency said it would "review" its corporate governance rating.

Renaissance Capital said in a research note that it had downgraded Aeroflot to short-term "hold" due to the uncertainty over the ownership of the airline, a potential strike by employees, and a recent surge in share price, which makes it no longer "cheap."

Aeroflot shares dropped 3.9 percent to close at $0.332 on Thursday.

Standard & Poor's said it was concerned about the recent change in ownership at Aeroflot, "whereby one shareholder group may be able to have a blocking minority of more than 25 percent."

Vedomosti reported earlier this month that over 29 percent of Aeroflot's shares had been acquired by companies close to Sibneft tycoon and Chukotka Governor Roman Abramovich.

S&P said it would review its 5.3 corporate governance score for the airline because, "the fact that the name[s] of the new owner[s] is [are] not disclosed has negative implications … and nontransparency of ownership increases the risk for Aeroflot's minority shareholders."

In March, S&P published its first-ever corporate governance rating for an emerging market company, grading on a scale of one to 10.

Aeroflot spokesman Alexander Lopukhin said Thursday that all questions regarding ownership "should not be addressed to us [because] we do not choose our shareholders."

The government owns 51 percent of Aeroflot.

The announcements by Renaissance and S&P come just two days before the company's annual shareholders meeting, where it is expected to be able to boast of the profit it earned for the first time in 2000.

Yulia Kochetygova, S&P's Russia-based corporate governance director, said the Aeroflot review would not necessarily result in a lower score, "but it most likely will because there is little belief that the new shareholders will reveal themselves at the annual meeting."

"If, hypothetically, Abramovich comes to the shareholders meeting and says 'yes I do own the shares and here are the companies that represent my interests,' then the rating could be raised," she said.

"But despite the rumors [about new shareholders] we maintain that we do not know them," Kochetygova added.