AvtoVAZ tempts Renault to take control with $386m share issue

AvtoVAZ, the Russian car manufacturer behind the country’s iconic Lada  brand, is hoping to raise RUB25bn ($386m) from France’s Renault – its largest  shareholder – through a new share issue in December. With the Renault-Nissan Alliance already controlling 49.9% of the company,  it is now looking to use the issue to reduce its debt and to fund new product lines, including the Vesta station wagon and a next generation Lada 4×4 crossover.
Although the share issue will be open to other existing and new shareholders, AvtoVAZ Board Deputy Chairman and Renault Group Senior Vice President Denis Le Vot yesterday indicated that Renault was willing to buy all of the new shares. “Of course we’ll look at the market reaction to this operation, but Renault is absolutely ready to go up to 25 billion rubles,” he said.
The new issue could see Renault’s  shareholding rise from 37% to 70%.
AvtoVAZ has had a difficult few years and reported a record loss of $1.1bn in 2015 and further $421m in the first half of 2016, taking its total debt up to $1.5bn. As well as reducing  that debt mountain,  it hopes that the increase in its capitalisation would help reduce the company’s interest payment burden and in the process strengthen its hand in negotiations with banks over further loans.  
It also hopes that its  plans to expand its product range, combined with a  stabilisation of the market, will  turn the last two year’s losses into profit by 2018. “The Russian market is now in recession and we very much hope that 2016 marked the low point. That should become clear in 2017,” said AvtoVAZ President Nicolas Mohr.
AvtoVAZ produces nearly one million cars a year and its VAZ factory in Samara is the largest car manufacturer in Russia and Eastern Europe and one of the largest in the world, with over 90 miles  of production lines.