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. Last Updated: 07/27/2016

GAZ Seeks to Delay Sberbank Payment

Throwing into jeopardy its plans to develop the new Volga 3111, Nizhny Novgorod automaker the Gorky Automotive Factory, or GAZ, has announced it will begin negotiations to postpone payment of a 250 million ruble ($8.7 million) credit to Sberbank.

Seeking such a postponement immediately calls into doubt the remaining 750 million rubles of a 1 billion ruble credit line the automaker secured from Sberbank last July to finance the start of full-scale production on the company's newest Volga model, the Volga 3111.

GAZ director Anatoly Gornev told Interfax on Monday that the auto giant will begin negotiations for a postponement with the Nizhny Novgorod branch of Sberbank at the end of February.

GAZ received the first 250 million ruble tranche of the credit line last October. Although the remaining three-quarters are in the form of a three-year loan, the first tranche matures this March. The automaker is hoping to utilize a provision in the lending agreement that allows for a five-month payment deadline extension, Gornev said.

Nizhny Novgorod Sberbank's public relations director Vladlen Kobrin would not comment on the announcement.

Officials from Sberbank said that the Nizhny branch has authority to independently conduct negotiations for postponing payment on the 250 million rubles.

Regarding the fate of the credit's remaining 750 million rubles, Sberbank remains committed to withholding a second tranche on the loan until GAZ reaches a payment agreement with the European Bank for Reconstruction and Development on a separate $65 million zero-interest loan the carmaker received from the EBRD, the GAZ's main creditor. Thus far, negotiations between GAZ and the EBRD have yielded no results.

GAZ has already begun an all-out marketing campaign for its "perfected Volga," and it needs the billion-ruble loan to launch production of the Volga 3111. The local Sberbank's 250 million ruble loan was used to purchase some of the equipment for the new Volga 3111 assembly line with a capacity of 10,000 cars a month. The finished assembly line is expected to cost $135 million.

Six months ago, the plant's administration announced that it could invest about $54 million into the new assembly line, and that it planned to obtain a further $40 million from Sberbank. The automaker said it would get the final $45 million from "other sources," which it has declined to name.

There has been talk that a partnership could be sealed with Nizhny Novgorod Motors-Fiat. However, the Italian automaker is in no rush to invest even in its own Nizhny Novgorod project.

Nizhny Novgorod Motors-Fiat is redrafting its business plan, and Fiat production in Nizhny Novgorod is not set to begin before 2002. Under these circumstances, Fiat is unlikely to consider any financial support for GAZ production.

Sberbank's decision to grant the 1 billion ruble credit to GAZ was part of its aggressive lending strategies last year.

A flood of private depositors and corporate clients piled into Sberbank after the 1998 crash left the state bank as seemingly the only safe bank in Russia.