Moody's upgrades MegaFon

Moody's Investors Service said it upgraded OJSC MegaFon's corporate family rating and MegaFon SA's $375 million loan participation notes due 2009 to Ba3 from B1.

The outlook is stable.

The agency said the upgrade reflects MegaFon's continued robust operational and financial performance, its expected free cash flow position for the year 2006 based on the financial results for the first nine months of 2006, the further streamlining of the company's capital structure with repayment of a derivative instrument, C- Loan, in the amount of $188 million to the European Bank for Reconstruction and Development and the company's modest total debt-to-EBITDA leverage of roughly 0.9x on an annualized basis.

At the same time, the ratings continue to take into account the company's unresolved shareholder dispute, Moody's said, adding that while the dispute does not have an immediate impact on the company's operating activity, it does limit visibility as regards to financial policy and potential dividend payments.

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