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OJSC LSR Group Sets a New Benchmark Loan Rate for Domestic Construction Companies.

19 July 2007

On July 19, LSR Group placed a third bond issue worth 3 billion roubles at a record-beating low coupon rate for the construction and real estate development sectors (8.35% in roubles). Previously construction companies were unable to place their rouble loans at a rate below 9%.

The success of LSR’s bonds placement was due to company’s good IFRS results in 2006 certified by KPMG, a B1 corporate rating assigned to the company by Moody's Investors Service, as well as a favourable market situation.

The investors were offered shares in OOO LSR-Invest, a 100% subsidiary of LSR Group founded specifically to raise funds for Group’s companies.

69 bids for a total amount of 5.921 billion roubles were received for the shares. Thus, the market demand was nearly twice the supply, and the whole issue was successfully placed.

The maturity term is four years. The shares have been placed by open subscription at MMVB Stock Exchange and will be traded at MMVB and the OTC market. The issue lead managers are Uralsib Financial Corporation and ABN-Amro, and the underwriter is Uralsib Financial Corporation.

According to financial analysts, the placement is unparalleled for a construction sector company. “Today we are witnessing a breakthrough in the market valuation of the earning power of a construction company due to both the reassessment of sector risks by investors and the keenness and strong willingness of the company itself to resort to the public debt capital market,” commented Executive Director Aleksandr Pugach, head of debt instrument business division of Uralsib Financial Corporation. “LSR Group holds leading positions in its markets of presence, has a diversified business and bright prospects of development. Significant interest in LSR’s bonds has been shown now by all key categories of investors – Russian and foreign banks, management and investment companies. As a result of high demand and competition between bidding investors, the coupon rate was set at a notably lower level than forecasted by most experts. We are confident that investors’ interest in LSR’s bonds in the secondary market will also be high.”

Commenting on the placement, Elena Tumanova, CFO of LSR Group, said that investors on the Russian bonds market have already got a lot of experience and a wide choice for investing in debt instruments of construction sector companies. “An appreciable demand for and the low yield of LSR Group’s bonds as shown by today’s placement testify to the recognition of the credit power and long-term competitive strengths of the integrated business model of our company,” stated Elena Tumanova.

LSR Group is planning to use the funds raised through the bond issue to refinance the existing credit portfolio as well as to finance Group’s investment projects such as the construction of brick and cement plants in Russia.

It should be noted that the debut bond issue worth 1 billion roubles was launched by LSR Group in March 2005. The coupon interest rate was established at 14% (today’s coupon rate is 10% p.a.). The second loan of the Group for 2 billion roubles was placed in December 2006. Its coupon rate at the time of placement was one of the lowest in the bonds market of Russian construction companies – 10.7%.

For reference:

OJSC LSR Group is a vertically integrated diversified holding company, a leader of the Russian construction industry. Its core business areas are building materials, construction and real estate development. The Group includes companies for aggregates extraction and processing, building materials production and transportation, and housing construction – from mass market large-panel housing to elite residential property built after designs made by leading domestic and foreign architects.

LSR Group has operations and offices in St. Petersburg, Moscow, a number of cities in the Leningrad Region, in Lithuania, Latvia, Estonia and Ukraine. LSR employs over 14,000 people.

According to the audited consolidated IFRS results of OAO LSR Group, its earnings in 2006 amounted to 21.1 billion rubles, a 61% increase over 2005, pre-tax income in 2006 reached 1.76 billion rubles, and net profit stood at 1.1 billion rubles.

OJSC LSR Group:

No.1 in Russia in ceramic brick production
No.1 in Russia and Northern Europe in aerated concrete production
No.1 in Russia in construction aggregates production
No.1 in Russia in ready-mix concrete production
No.1 in St. Petersburg in elite real estate development
No.1 in St. Petersburg in reinforced concrete production
No.1 in St. Petersburg in large-panel housing construction.

For more details please contact:

LSR Group Press Service
+7 (812) 314-1044
press@lsrgroup.ru
www.lsrgroup.ru

«LSR Group» discloses information on the page on the Internet of LLC Interfax-TsRKI — the news agency accredited by the Central Bank of the Russian Federation to disclosure of information.
Information is available here.



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