OREANDA-NEWS. September 29, 2009. Credit-Rating, a nationally recognized credit rating agency in Ukraine has today announced that it downgraded to uaBB from uaBBB the long-term credit ratings assigned to Lviv-based Galnaftokhim CJSC (‘issuer’ or ‘company’) and registered interest-bearing bonds (series C). The amount of the issue is UAH30m, with 5-year original maturity. The outlook on the ratings has been changed to negative from stable. The ratings have been also placed to Rating Watch List. The company’s principal activity is trade of mineral fertilizers. In the course of analysis Credit-Rating considered issuer’s financial statements for 2008 and 1H2009 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.

Negative outlook indicates that there is a possibility to downgrade the rating in the course of the year, on condition that negative tendencies are retained and current risks are realized.

The Rating Watch List is intended to inform financial market participants about possible changes of ratings in short-term prospective. The rating placed on RWL denotes that Credit-Rating is currently considering its change as a result of events or ongoing trends, which may negatively affect creditworthiness of a rating’s bearer.

Factors maintaining the credit rating

Issuer’s strong market standing in the west part of Ukraine.

The company’s key figures grew in 1H2009 versus 1H2008, specifically the net sales soared by 15.7% to UAH203.6m and the operating profit increased by 3.8% to UAH14.5m.

Factors constraining the credit rating

Company’s eroded liquidity, which entailed late coupon payments on bonds of series ‘C’.

A major part of issuer’s property is pledged as security for bank loans.

Decline in demand for mineral fertilizers under crisis environment in Ukraine.

Low entry barriers to the market of mineral fertilizers.