Russia-Based Construction Company LenSpetsSMU (CJSC) Assigned 'B' Ratings; Outlook Stable (S&P press-release)

22.12.2006

Russia-Based Construction Company CJSC SSMO LenSpecSMU Assigned 'B' Ratings; Outlook Stable

S&P Rates Construction Co CJSC SSMO LenSpecSMU 'B'; Otlk Stbl

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Primary Credit Analyst: Lorenzo Sliusarev
Secondary Credit Analyst: Izabela Listowska

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MOSCOW (Standard & Poor's) Dec. 22, 2006--Standard & Poor's Ratings Services said today it assigned its 'B' long-term and ‘B’ short-term corporate credit ratings to CJSC SSMO LenSpecSMU (LSS), a leading St. Petersburg-based Russian construction and development company. The outlook is stable.

At the same time, Standard & Poor’s assigned its 'ruA-' Russia national scale rating to the company. The senior unsecured Russian ruble bonds previously issued by guaranteed subsidiary CJSC CUN LenSpecSMU were rated 'ruA-' on the Russia national scale.

The ratings are constrained by LSS’ aggressive growth appetite; the evolving and fairly complex regulatory environment in which it operates; the lack of administrative transparency and predictability in Russia; and the company's limited market diversification and size. A further constraining factor is the cyclical nature of the construction and development industry, which is exposed to fluctuating economic dynamics and uncertainty regarding Russia’s evolving political, legal, and business climate.

These risks are moderated by robust industry growth in Russia combined with LSS' vertically integrated, competitive business model; sizable market position;

established operating track record; and management’s effectiveness in controlling costs and maintaining effective administrative relationships.

A moderate debt burden and adequate liquidity also benefit the credit profile.

We expect the business risk profile to remain supported by sound market fundamentals and industry demand, combined with management's proven operating track record and demonstrated commitment to a manageable financial policy and cost control.