Moody's upgrades Stirol to B3

Moody's Investors Service said it upgraded OJSC Concern Stirol's corporate family rating and UkrChem Capital BV's senior unsecured loan participation notes to B3 from Caa1.

This concludes the review begun on Aug. 11, 2006, and the outlook is negative.

The upgrade follows the resolution of various covenant violations in the loan agreement underlying the notes. The agency said Stirol obtained a waiver from the noteholders of certain breached provisions and consent for certain amendments to the loan agreement.

The negative outlook reflects the pressure from a volatile fertilizer market with rising feedstock prices on Stirol's margins given the threat from low-cost producers and the risk of profits extraction as a majority of sales are conducted through a trading entity that is only 51% owned by Stirol, Moody's said.

The agency also noted that while the covenant waiver effectively mitigates the imminent technical default on the company's notes, pending since August 2006, the waiver relates only to the covenant breaches identified in the 2005 accounts and does not embrace future periods.

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