OREANDA-NEWS  On 08 October Credit-Rating, a nationally recognized credit rating agency in Ukraine announced that it downgraded to uaB from uaBB- (uaBB minus) the long-term credit rating assigned to registered housing bonds (series I-P) issued by Kiev-based Gradostroy LLC (`issuer` or `company`). The amount of the issue is UAH 23.5m due Dec. 22, 2008. The rating outlook has been changed to stable. The company`s principal activity is investing and construction. To revise the rating Credit-Rating considered issuer`s financial statements for 2Q2008 and its other inside information.

An obligor or a debt liability with uaB credit rating is characterized with the LOW creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is extremely susceptible to adverse changes in commercial, financial and economic conditions.

Factors maintaining the credit rating

The issuer has experience in residential construction; in fact it has commissioned residential buildings of 42.4K sq.m. total floor area.

The construction readiness of the residential building located 9b, Kirova Str., borough of Mikhailovka-Rubezhovka, Kiev Oblast, which premises to redeem the bond issue is over 50% as of June 30, 2008

Factors constraining the credit rating

The issuer does not have experience in redemption of housing bonds.

Issuer`s negative equity of UAH6.1m as of June 30, 2008, which has been prompted by issuer`s detrimental performance in 2005-2007 and 1H2008.

Delays in commissions of residential buildings, premises in which are to redeem the bond issue, of up to 1 year duration.

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