Russian Technologies State Corporation, Renault and Troika Dialog Investment Company on Thursday said shareholders of OJSC AvtoVAZ had signed a base agreement for restructuring and recapitalising the giant automaker.
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Shareholders had earlier formalised timing and methods with a memorandum of understanding (MoU) signed last 27 November 27, 2009 witnessed by Russian Federation prime minister Vladimir Putin, French prime minister François Fillon and Samara region governot Vladimir Artyakov.
The MoU signing preceded the Russian government’s announcement that AvtoVAZ would receive massive government support; last December it allocated RUB40bn of financial aid which the automaker used to reduce bank debt and increase liquidity.
The government in turn demanded gradual, partial conversion of the borrowed funds into AvtoVAZ shares while preserving Renault’s 25% stake and, according to the MoU, called for the French partner’s participation in AvtoVAZ’s new equity capital.
Following the MoU signing, the automaker and shareholders got to work on the practicalities: government industry ministers approved a new business plan for 2020 including developing a new vehicle line.
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By GlobalDataThe business plan includes: building 900,000 automobiles per year from 2015, 70% of which are AvtoVAZ models; keeping AvtoVAZ’s domestic market share above 25%; and developing exports.
The business plan also called for specific stages and methods for increasing capital.
The tri-party deal has been coordinated by Troika Dialog.
Under the basic agreement, which explicitly regulates shareholders’ actions during the process of restructuring and recapitalising AvtoVAZ, Renault will, by 2012, invest the equivalent of EUR240m, keeping its stake in its Russian party no lower than 25% plus 1 share. Renault also will help with production of new models on the B0 (Logan) platform.
Renault is also helping AvtoVAZ develop an entry-level model to replace the outdated Fiat 124-based Lada model with which the Russian firm, under licence, began modern car production in the 1960s.
Russian Technologies State Corporation, in turn, will convert part of AvtoVAZ’s debt into shares.
In 2012, following the completion of the main recapitalising phases, the parties will announcethe initial results and set down the main targets of the partnership’s future development.
Igor Zavyalov, deputy general director of the Russian Technologies State Corporation for Finance and Economics, and AvtoVAZ board member, said in a statement: “Realising the agreement between the core shareholders in AvtoVAZ is the latest important step in developing Russia’s auto industry, which is proceeding according to the industry development strategy approved by the relevant government ministries.”
Christian Esteve, who heads Renault’s Eurasia region, said: “Russia remains one of our priority regions, meaning Renault is interested in continuing its active and long-term partnership with AvtoVAZ – there are unique prospects for both sides.”
AvtoVAZ president Igor Komarov said: “In its work on the restructuring programme, [the automaker is] simultaneously addressing several important questions affecting the company’s development prospects and Russia’s auto market overall. Thanks to the Russian Federation government’s financial support, AvtoVAZ was able to redeem its bank debt and optimise business prospects, while through the strategic partnership with Renault we are organising modern manufacturing using advanced foreign technologies.”
Troika managing director Serguei Skvortsov said: “We are pleased to act as coordinator of the process of restructuring and recapitalizing AvtoVAZ – the torchbearer of Russia’s auto industry. It’s good that the partners are basing their actions on long-term partnership plans – this will certainly have a positive effect on AvtoVAZ’s operations and the consumer qualities of Lada automobiles.”
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