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. Last Updated: 07/27/2016

Shareholders Back KamAZ's New Share Plan to Pay Debt




Shareholders in troubled Russian truckmaker KamAZ on Tuesday approved an issue of 300 million new ordinary shares in a move to pay off the company's debts, a company spokesman said.


The new issue will more than triple the number of shares outstanding, and will support an issue of convertible bonds to creditors owed a total of 8 billion rubles ($1.3 billion), spokesman Nail Galiullin said.


The bond issue is to be registered by the company's June 26 annual shareholders' meeting.


Once the bonds are converted into shares, KamAZ's ownership will change significantly. Russia's federal government and the government of Tatarstan, both of which are owed major sums, will own 25 percent each, Galiullin said. Creditors Sberbank and Vneshtorgbank will together own about 25 percent, according to Andrei Kozlov, an auto analyst with Aton brokerage.


Other creditors include the European Bank for Reconstruction and Development and the natural-gas monopoly Gazprom.


Given that KamAZ's $1.3 billion debt is almost 10 times greater than the company's $160 million market capitalization, the issue undoubtedly will dilute the holdings of current shareholders, Kozlov said.


Among those shareholders is U.S. investor Kohlberg Kravis Roberts & Co., the truckmaker's financial adviser and owner of a 26 percent stake in the company. Other groups tied to KamAZ management own about 60 percent.


Creditors of the ailing truckmaker may not be thrilled to be paid in equity, but there is little hope they will be paid in cash, Kozlov said.


"This is the best way out for creditors, because the company won't be able to pay these debts because its production has totally stopped," Kozlov said.


A lack of working capital brought KamAZ's main production line to a halt in January. The company most recently said the line would be started up Monday, but it was unclear whether production had indeed started.