OREANDA-NEWS  On 29 September MDM Bank announced that Fitch Ratings had assigned BBB-/Stable ratings to MDM DPR Notes series 2006-A and 2007-A issued by MDM DPR Finance Company S.A. on 25 July 2008.

On 24 September 2008, Moody’s Investor Service downgraded the same MDM DPR Notes (series 2006-A and 2007-A) to the level of MDM Bank’s long-term rating (Ba1/Stable) from Baa2 and Baa3, respectively. MDM Bank’s long term deposit rating from Moody’s remains unchanged at Ba1/Stable. The downgrade of the DPR notes by Moody’s is not expected to cause any adverse change in the Bank’s financial condition or liquidity and does not lead to any obligation to repurchase DPR notes or any other debt by MDM Bank or any of its subsidiaries.

According to the Moody’s press release published on 24 September, the agency’s initial rating did not take into account the fact that if certain early amortization events were to occur, there is risk a of cross-default clauses being triggered on other MDM Bank wholesale international debt. While Moody’s notes in its release the good performance of the underlying DPR flows, the agency states that following its initial rating, it received independent advice from a legal counsel that led it to reconsider the rating for these issues.

Fitch has also considered and analysed the above-mentioned risk as a part of its rating process and this factor has not affected Fitch’s decision to award an investment grade BBB-/Stable rating to the DPR notes, nor has it been specifically highlighted as a perceived risk for DPR noteholders in the New Issue Report dated 25 July 2008.

MDM Bank, together with the arrangers of the DPR Notes, has cooperated with Moody’s to find structural solutions to mitigate the risks perceived by the rating agency. However, it has not been possible to re-structure the MDM DPR Programme to satisfy Moody’s concern.

As noted by Moody’s in its release, the MDM Bank DPR Notes covered by these ratings have performed well and the outstanding debt represented by the DPR Notes is strongly covered by the pledged diversified payment rights: in August 2008 monthly Debt Service Coverage Ratio (DSCR) at 64.42x and quarterly DSCR at 89.24x. Attached for your convenience is the most recent August 2008 investor report relating to the notes.