In November ALROSA launched successfully its 10-year Eurobonds in the total amount of USD300 million with an 8,875 % coupon. ALROSA is the third Russian company to issue 10-year corporate Eurobonds, and the expert community points out that ALROSA’s yield is slightly above the largest Russian issuer Gazprom and appears below Severstal.

As analysts say, ALROSA’s bonds were mainly aquired by American investors (investment funds and insurance companies) known to be particularly scrupulous about issuer’s transparency, corporate management quality and credit risk analysis.

This Eurobond placement completes ALROSA’s two-year restructuring program of its corporate credit portfolio. In June 2002 the Board launched the program with the aim of improving the structure and quality of Company’s corporate credit portfolio. The main directions of the program are as follows:

- Abandon the issuance of promissory notes;

- Replace the promissory notes with marketable bonds denominated in rubles (3 billion rubles issue of 3-year bonds in October 2002);

- Replace debt instruments denominated in rubles by dollar denominated bonds (USD500 million 5-year Eurobonds placed in May 2003; USD 100 million syndicated loan in August 2004; USD 300 million of 10-year Eurobonds).

Throughout 2004 ALROSA has been gradually relieving its debt burden. Compared to debt of USD1.2 billion in the beginning of 2004, the planned 2005 opening  debt is to go down to USD1.1 billion, and 2006 opening debt is expected below USD1 billion.

 Today 85% of ALROSA’s credit portfolio is associated with long-term debt (only 40% as of the 2002 year end), and 15% is made up of short-term instruments, with 88% of the total debt denominated in foreign currency and 12% in rubles.

Thus, in 2004 ALROSA has achieved its credit portfolio restructuring targets determined in 2002.

At present ALROSA’s first priority is to reduce interest payments. With a view to this task ALROSA considers to get a direct access to low-interest rate European capital market. In the beginning of 2005 Company plans to launch up to USD300 million program of up to 1 year Euro Commercial Papers to fund our seasonal operating needs, including the “Northern deliveries”.

With the achieved financial soundness, ALROSA can use its own growing profit to develop its production facilities, enhance its mineral resources base and further minimize its debt.

The successful restructuring efforts of the credit portfolio have resulted in optimized corporate balance-sheet structure to ensure future synchronization of investments and liabilities .

After this strategic change of its debt structure is completed, ALROSA can enhance its cooperative contacts with rating agencies with a purpose to achieve rating of investment grade.