AvtoVAZ share issue no option after state aid - Renault

An additional share issue is not being discussed as a measure to help AvtoVAZ amid the ongoing economic crisis after the Russian carmaker received $776 million in state aid, a Renault executive said on Friday.

MOSCOW, April 17 (RIA Novosti) - An additional share issue is not being discussed as a measure to help AvtoVAZ amid the ongoing economic crisis after the Russian carmaker received $776 million in state aid, a Renault executive said on Friday.

Renault, which holds a blocking stake in Russia's largest carmaker, had objected to the share issue, which could have led to the dilution of its 25% plus one share stake.

"This alternative is no longer needed," Christian Esteve, a member of Renault's Management Committee in charge of its Russian division, said in a RIA Novosti interview. "An additional share issue was one of options considered by the Russian government in response to AvtoVAZ's request for financial aid."

The government said on March 30 it would allocate 26 billion rubles ($776 million) in aid to state Russian Technology Corporation that owns another 25% plus one share in AvtoVAZ, which is to give an interest-free loan to the producer.

AvtoVAZ's debt currently stands at 44 billion rubles ($1.3 billion), the figure that includes its bond loans. The carmaker has several times suspended production over payment disputes with car part suppliers.

Renault, which bought the stake in AvtoVAZ for $1 billion in 2008, earlier said it had lost 117 million euros last year due to the revaluation of the Russian company, whose current capitalization is $285 million.

Esteve said Renault Group still regarded the deal a profitable investment as it expected the Russian car market to resume growth.

"The purchase of the AvtoVAZ stake is a long-term investment, which will pay off in the future," Esteve said. "It will allow Renault have a strong position on the market, which will be one of the world's fastest growing."

The sales of AvtoVAZ's trademark Lada models dropped 37% year-on-year in January-February 2009, production declined by 77% and earnings plunged by 58% in the period.

Esteve said Renault would help the carmaker expand its model lineup and regain its traditional markets in former Soviet republics. He said the production of new pickup and hatchback Ladas based on the Logan model would begin in 2011.