OREANDA-NEWS  On 10 September Credit-Rating, a nationally recognized credit rating agency in Ukraine announced that it downgraded to uaBB from uaBBB- (uaBBB minus) the long-term credit rating assigned to Lugansk-based Korovai OJSC (`issuer` or `company`). The rating outlook has been revised to stable. The company`s principal activity is production and sale of baked goods, mainly within Lugansk region. To revise the rating Credit-Rating considered issuer`s financial statements for 1H2008 as well as 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.

Factors maintaining the credit rating
The issuer owns production facilities (8 bakery combines), which empowers the company (according to its data) about 80% of the segment in the city of Lugansk and 30% in Lugansk Oblast.
Non-flexible demand for the issuer`s produce.

Factors constraining the credit rating


Issuer`s imperfect system of financial planning, which prompts issuer`s improper meeting its commitments on the obligations.


Decline in issuer`s output rates to 76.8K metric tons in 2007 from 99.7K metric tons in 2004.


Decrease in indicators of issuer`s operating activities in the past 2 years, specifically the cash flow from operating activities shrank to UAH(50.3)m in 2007 from UAH31.4m in 2005, with the operating profitability dropped to 0.9% from 4.3%.


Major part of issuer`s property is pledged as security for bank loans.


Issuer`s vulnerability to state policy in the agricultural sector.