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14.02.2007
Credit quality of housing bonds issued by Ukrainian companies remains low
"Credit-Rating", a nationally-recognized credit rating agency in Ukraine says that 94% of registered housing bonds issued for funding the residential and commercial construction have low speculative-grade ratings according to the National scale which exhibits issuers` doubtful capacity to meet their commitments on obligations.
The agency believes that low credit ratings reflect high specific gravity of borrowed funds in financing sources structure, absence of experience in implementation of construction projects, low information transparency and doubtful probability of external financial support in case of aggravation in market environment. A rating is also affected by availability or unavailability of permitting documents for construction and by stage of construction process.
According to the head of agency`s rating monitoring department Andrey Kulik "the lower is a speculative-grade rating, the higher is the probability of default and overdue or incomplete fulfillment of obligations. When assigning a rating, the agency`s experts analyze both external environment (market, demand, consumers, competition) and internal environment (analysis of financial and economic performance, financial and administrative management effectiveness, evaluation of debt burden, evaluation of risks and issuer`s capabilities on their minimization)".
First redemptions of housing bonds are scheduled for 2007 and 2008. Taking into account the low ratings assigned to these issues, the agency anticipates several issuers may encounter a default in next 2 years.
The "Credit-Rating" agency has operated on the Ukrainian market since 2001, being involved in assigning credit ratings in accordance with the Ukrainian national scale. Since 2003 the agency has assigned 449 credit ratings to Ukrainian entities, banks, insurance companies and municipalities, including 262 ratings assigned to housing bond issues for construction funding for the amount of UAH 15.5bn with debt obligations for the amount of UAH 14.3bn having speculative-grade ratings.
Information on all the credit ratings assigned in accordance with the Ukrainian national scale may be found in the REUTERS and BLOOMBERG information systems.
For further information, please contact:
Information and analytic department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua
