OREANDA-NEWS. On 25 April 2008 Credit-Rating, a nationally recognized credit rating agency in Ukraine announced that it assigned a long-term credit rating of uaBBB to registered coupon bonds (series C) to be issued by Lviv Oblast-based Galychyna CJSC (`Issuer` or `company`). The amount of the issue is UAH30m, with 3-year original maturity. The company`s principal activity is production and sale of whole-milk products, as well as of dry defatted milk, butter, and hard cheeses. In the course of analysis Credit-Rating considered Issuer`s financial statements for 2003-2007 as well as its other inside information.

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

Factors maintaining the credit rating

The Issuer operates on Ukraine`s dairy market being among 5 biggest national producers (enjoying a 7% market share).

Issuer`s key figures have improved over the past 3 years: the assets grew 6.5x to UAH188.5m; the sales net proceeds increased 2.2x to UAH270.1m; the fixed-capital investments have amounted to UAH77.4m in 2005-2007 accompanied by stable profitability indicators (the EBITDA profitability fluctuated about 11%).

Factors constraining the credit rating

Issuer`s significant debt burden, which stems from its active investing (the equity to asset ratio makes up 0.14 as of Jan.1, 2008), almost all Issuer`s plant and equipment are pledged as security for bank loans.

The Issuer suffers from absence of own raw material base, which stems from decreased livestock of cattle occurred over the past few years, this requires significant investments for its development.

Seasonality of production and vulnerability to state regulatory policy and competition in the agricultural sector, which became more severe after Russia`s embargo on import of meat and dairy products.