Moscow, Russia, 13 May, 2008 - Sistema-Hals JSC (LSE, MICEX, RTS: HALS), one of the leading diversified companies on the real estate market of Russia and the CIS, announced today that Fitch Ratings had confirmed a B+ credit rating for Sistema-Hals JSC.

In its press release, Fitch Ratings singled out that it is confident that Sistema-Hals' immediate debt maturities will be met.

At the same time, Fitch Ratings has changed Sistema-Hals' Outlooks to Negative from Stable. This action reflects Fitch's heightened concerns negative situation on the whole market and especially over Sistema-Hals's liquidity position, which has decreased in recent months.

Fitch implied, that Sistema-Hals' currently has low level of back-up liquidity (i.e. cash and committed undrawn credit lines) which makes it overly reliant on either regular bank refinancing or operational cash flows to meet its future short-term maturities. While the Moscow real estate market is currently experiencing strong growth, it, like any real estate market, has the potential to suffer unforeseen negative shocks, which, in turn, could disrupt cash flows and reduce banks' willingness to lend. As such, Fitch believes it is imperative that real estate developers such as Sistema-Hals retain a good level of back-up liquidity at all times.

Fitch noted, that Outlook would return to Stable if a new liquidity policy is successfully implemented over the next 3 to 12 month.

Sistema-Hals' Finance Director Andrey Solovyov explained:

"We believe that we have already created efficient cash flow planning mechanisms and do not see a temporary fall in the liquidity ratio vs. the projected amount as a potential long-term concern for us. We believe that our last year's investments in the premium segment of the market with a very strong growth potential will benefit our stockholders in the long-run, especially taking into consideration that we are on the safe side, since most of the debt has a 5 year or longer maturity, which gives us a solid cushion for the future investment program.

Although we realize that the situation in the credit market is a tough one at the moment, and fully understand the concern of the Rating agency in this regard, we feel very confident, that we will be able both to generate cash flow from operations from sale of apartments and land plots and to attract necessary additional funding to finance both immediate short-term cash needs and long-term project financing. Recently, we have attracted a new $88mln credit facility from Alfa-bank to finance our Gorky-8 projects and in addition to that have just received a credit committee approval for the new VTB loan.

Also, we value the advice of Fitch to formalize and implement a more conservative approach to liquidity policies and more formal internal control procedures.

 

The information contained in the press release may contain forward-looking statements regarding future events or the future financial performance of Sistema-Hals. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could", "may" or "might" the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date thereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema-Hals and its operations. Many of these factors are beyond the Company's ability to control or predict. Given these and other uncertainties, readers are cautioned not to place undue reliance on any of the forward-looking statements contained herein or otherwise. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements (which are made as of the date hereof) to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required under applicable laws.