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. Last Updated: 07/27/2016

KamAZ Set to Boost Production to $1Bln

The nation’s biggest truck maker, KamAZ, announced Tuesday that it planned to boost 2001 production to $1 billion after striking a deal with creditor EBRD over an overdue debt of $141 million.

Under a deal signed Friday, half of the debt will be swapped for a 5 percent stake in KamAZ, and the rest will be paid from 2002 to 2012, with the government guaranteeing twice-yearly repayments, said Richard Wallis, spokesman for the European Bank for Reconstruction and Development.

KamAZ has already registered a new share issue needed for the debt conversion, Wallis said.

Currently, almost 80 percent of KamAZ’s shares are in the hands of the state or state-controlled entities. The government owns 38.9 percent, state-owned Vneshtorgbank has 20 percent and the Tatarstan government has 14.6 percent, according to Reuters.

"The EBRD welcomes this settlement and looks forward to working with the other shareholders of KamAZ on ways to improve the performance of the company," Mary Ellen Collins, a senior banker at the EBRD, said in a statement.

The EBRD extended a $100 million loan to KamAZ in 1995, but the cash-strapped truck maker fell behind with its repayments in 1998. The EBRD then took KamAZ to court, and the company found itself cut off from financing from other international lenders, which refused to disburse loans before the debt issue was settled.

But with Friday’s settlement in hand, KamAZ can now access the $75 million left in a $150 million credit line opened by Japan’s Eximbank in 1994, KamAZ general director Ivan Kostin told a news conference Tuesday in Kazan, Tatarstan, Prime-Tass reported.

Japan extended the loan to finance the purchase of equipment for a new engine plant after KamAZ lost its engine plant in a 1993 fire.

Kostin said the new equipment will allow KamAZ to produce 26,000 trucks and 37,800 cars with a total price tag of $1 billion this year.

Renaissance Capital forecasts sales of about $870 million for 2001.

Kostin said the plant sold 22,000 trucks and 33,600 cars last year.

The Naberezhniye Chelny, Tatarstan-based plant produced about 120,000 trucks a year at its peak in the 1980s. In 1997, production had dropped to 12,700 and in 1998 to 3,290.

KamAZ had also racked up a staggering debt of $1.2 billion by the end of 1998. Most of the debt — except for a handful of loans, including the one from the EBRD — was converted into plant shares.

Now that a deal has been reached with the EBRD, the stage is set for KamAZ to build itself into a solid company, said Renaissance Capital analyst Eugene Satskov.

"They are seeing significant growth, and very positive changes are taking place," Satskov said.

In addition to tackling its debts after the 1998 crisis, KamAZ changed its distribution system and launched a new line of trucks with engines built to European standards, he said.