The Russian government is considering allowing troubled carmaker AvtoVAZ to convert the debt it owes state controlled banks Sberbank and VTB Bank into shares.

Russian media reports cited deputy finance minister Alexander Novak as saying that the debt for shares option was one of two avenues open to AvtoVAZ to settle with creditors. The other was providing AvtoVAZ with government guarantees for debt restructuring and subsidising interest rates on the carmaker's loans.

A final decision is expected within a month, Novak added.

AvtoVAZ, 25% owned by Renault, on Monday (12 October) increased pressure on politicians to put up more money to help it through the current downturn and refinance its debt mountain, saying it remained on the edge of bankruptcy.

It said there was "significant doubt" about its ongoing existence as it reported that its net loss widened nine times and it was relying on the Russian government to refinance US$2bn of short-term debt. It also said it was confident the Kremlin would come to its rescue.

The Russian government in turn has put pressure on Renault to help and the French automaker in turn responded by saying there were other ways to help other than by injecting cash, such as developing models for AvtoVAZ production lines to replace outdated current models [such as the Lada sedan line which can trace its origins back to Fiat's 1960s 124 - ed].