Moody's cuts Orco Property to Baa3

Moody's Investor's Service said it downgraded the national-scale rating of Orco Property Group SA to Baa3.cz from A3.cz.

The outlook is stable.

The rating change concludes the review for possible downgrade on Orco's ratings that was initiated in July following the announced acquisition of Viterra Development.

The downgrade reflects the company's increased exposure to more matured markets in Western Europe, the expected impact of this acquisition on its financial profile and the refinancing risk resulting from a rating trigger in the company's bond documentation which, based on existing covenants, may arise from the CZK1.5 billion bond issue at the end of 2006, the agency said.

The rating also reflects the cyclical nature of residential development activities and exposure to intrinsically volatile macro-economic indicators. The rating is constrained by weak cash flow and an aggressive acquisition strategy, Moody's said it said it said it said it said it added.

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