OREANDA-NEWS  On 03 October Credit-Rating, a nationally recognized credit rating agency in Ukraine announced that it downgraded to uaBB+ from uaBBB the long-term credit rating assigned to registered housing bonds (series A-C) issued by Cherkassy-based Krug-Budinvest LLC (`issuer` or `company`). The amount of the issue is UAH24.2m, with 3-year original maturity. The company`s principal activity is investing and construction. Today the company constructs a residential building with installed premises located in the city of Cherkassy. To revise the rating Credit-Rating considered issuer`s financial statements for 2Q and 1H2008 and its other inside information.

An obligor or a debt liability with uaBB credit rating is characterized with the LOWER THAN SUFFICIENT creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is strongly affected by adverse changes in commercial, financial and economic conditions. A plus "+" and a minus "-" signs indicate intermediary categories compared to the standard categories (grades).

Factors maintaining the credit rating

The issuer is incorporated with Krug group of companies, which has experience in investing and construction, in fact it has commissioned 4 buildings of 22.7K sq.m. total floor area.

The construction readiness of the building with installed premises (1st phase) located 70, Vishnevetskogo Str. (building #78), city of Cherkassy (which premises to redeem the bond issue of A-C series) is 7% as of June, 30, 2008.

The group has production facilities, which empower it to supply the construction process on almost all stages.

Factors constraining the credit rating

Issuer`s dependency upon Krug group of companies and its vulnerability to redistribution of cash flows within the group neglecting issuer`s interests.

Issuer`s volatile performance indicators recorded in the past few years.

The proprietary rights for the unfinished building, which premises to redeem the bond issue, are pledged as security for a bank loan.

Instability in legislation and tax environment controlling both the construction industry and project financing.