AvtoVAZ's three main shareholders agreed Thursday to a two-part restructuring of the carmaker that will see state-run Russian Technologies boost its stake to 29 percent by 2012 while France's Renault retains its blocking stake.
The federal government gave AvtoVAZ a support package of 40 billion rubles ($1.3 billion) in December to help the struggling carmaker pay down bank debt and repay suppliers. The funds, contributed through Russian Technologies, brought AvtoVAZ's debt to the state corporation to 65 billion rubles.
Renault will provide the equivalent of 240 million euros ($306 million) in equipment and technology to maintain its 25 percent stake through the first phase of the transaction, which will see AvtoVAZ issue additional shares, the carmaker said in an e-mailed statement.
Russian Technologies will convert a proportional amount of debt into shares, the statement said.
AvtoVAZ's shares rose 1 percent in Moscow, outperforming the benchmark MICEX Index's 1.4 percent decline.
Speaking at the signing ceremony in Tolyatti, where the carmaker is based, Russian Technologies deputy head Igor Zavyalov said AvtoVAZ's board would consider the share issue July 28, with an extraordinary shareholders meeting scheduled for Sept. 9, Interfax reported.
The first phase of the two-part share issue will also be broken into two stages, he said.
In the first, from November 2010 to November 2011, Russian Technologies will contribute the equivalent of 330 million euros in rubles, and Renault will put in 114 million euros.
In the second stage, running to November 2012, the state corporation will invest 400 million euros, and Renault will add 126 million euros, he said, adding that the second phase of the share issue will take place from 2012 to 2016.
"Under the second phase, Russian Technologies' stake would rise to 36 percent," Zavyalov said, Interfax reported.
Troika Dialog, which also holds a 25 percent stake, will see its holding gradually reduced, said managing director Sergei Skortsov, who signed the agreement for the investment bank.
The bank, which said in March that it was ready to "exit" the company with a profit, will see its holding in AvtoVAZ fall to 20.5 percent this year and to 17.5 percent in 2012, he said.
Speaking to reporters in Yekaterinburg, Russian Technologies president Sergei Chemezov said it would be up to Renault to decide what to do when the second share issue comes around.
"That's for them to decide. Either they will agree to be diluted or they will contribute something else to keep their stake. For now, the plan is for them to keep their 25 percent stake," he said.
Renault senior vice president Christian Esteve said the company remained committed to Russia.
"Russia remains one of our priority regions, which is why Renault wants to continue its active and long-term cooperation with AvtoVAZ," Esteve said in the AvtoVAZ statement.
AvtoVAZ made a profit of just less than 1 billion rubles ($32 million) in the second quarter under international financial reporting standards, chief financial officer Oleg Lobanov said Thursday, Interfax reported.
The company said in June that it lost 49.2 billion rubles last year as sales plummeted 44 percent.