VEB Considering RUB 12b Investment in AvtoVaz

Russian car giant AvtoVaz appears on the verge of bankruptcy and is seeking help from Vnesheconombank (VEB), the Russian state-run development bank. A plan has been developed to provide AvtoVaz with a RUB 12 billion investment if state-run creditors can get in on the company’s share capital.

Opposed to the deal is Renault, the French automaker which holds a 25% blocking stake in AvtoVaz. Renault claims its shares would be diluted if the deal goes through, prompting AvtoVaz to work out a scenario to protect them. Under that scenario, shareholders Troika Dialog and Russian Technology Corporation would see their shares diluted instead.

In either case, the Russian government has made it clear this will be the last time help is granted to AvtoVaz, whose debt is near RUB 40 billion. The company has already announced plans to lay off 25% of its workforce while projecting a 2009 net loss of RUB 35 billion.

AvtoVAZ (www.vaz.ru)
As one of the leading manufacturers of cars in Russia and one of the largest automakers in Europe, AvtoVAZ produces over 750,000 cars each year. The company controls more than 70 percent of the market share in Russia and a joint venture with General Motors to produce an SUV, the Chevy-Niva, and a car, the Chevy Viva.

AvtoVAZ produces 14 models of vehicles, specializing in its Lada line of cars and trucks. 41.5 percent of the venture is controlled by AvtoVAZ and GM, while the European Bank for Reconstruction and Development also has a large share.

Vnesheconombank (www.veb.ru)
Vnesheconombank (VEB) was established in 1998 during a restructuring of joint stock bank Vneshtorgbank of the USSR. A second restructuring in 2002 was aimed at making VEB’s primary mission to aid government reforms and servicing government programs. In recent years VEB has been charged with helping specific sectors of the Russian economy recover from recession.

Troika Dialog (www.troika-dialog.com)
Founded in 1991, Troika Dialog is a privately owned investment bank in Russia providing service in the areas of investment banking, alternative investments, personal wealth and asset management, retail distribution and securities trading. With more than 1,300 employees, including 109 employee-owners, Troika operates in 20 Russian cities as well as Almaty, Kyiv, Nicosia, London, and New York.