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EBRD finances truck production in Russia
Production of heavy trucks at KamAZ, Inc., one of the largest industrial companies in the Russian Federation, will be significantly increased following the signing last week of a US$ 100 million loan agreement between KamAZ and the European Bank for Reconstruction and Development (EBRD). The EBRD will also obtain an option for 4,000,000 shares of KamAZ common stock, which may be exercised in the future.
Jacques de Larosière, President of the EBRD, said: “This loan is the largest commitment to date made by the EBRD for corporate restructuring in Russia. We have worked with KamAZ management and their partners, Kohlberg Kravis Roberts & Co. (KKR) and Cummins Engine Company, Inc. (Cummins), for over a year in developing this financing. We are also working with Russian banks to complete satisfactory restructuring of their loans as a condition of our loan, and expect to conclude those negotiations shortly.”
The US$ 100 million (ECU 76.9 million) loan from the EBRD will be used by KamAZ primarily to pay suppliers and employees, and for capital expenditures which will improve efficiency and replace equipment damaged in a disastrous fire in April 1993. The fire destroyed the engine plant and put a severe strain on the company’s financial position. These funds will enable KamAZ to increase dramatically production levels of heavy trucks and strengthen its future prospects.
Nikolai Bekh, Chairman of KamAZ, said: “This loan from a major international financial institution is an important step in our long-term capital raising programme. It will enable the company to restore its liquidity, allowing us to increase payments to suppliers and alleviate bottlenecks in obtaining critical components and materials.”
KamAZ, founded in 1969, is one of Russia’s leading manufacturers. It is located in Naberezhnye Chelny, Tatarstan, 1,000 kilometres east of Moscow, and directly or indirectly employs 130,000 people. At its peak, its annual production was over 125,000 trucks and 175,000 diesel engines. In the changed Russian economy and hampered by the diversion of cash to finance rebuilding of the engine plant, KamAZ has suffered from liquidity shortages which will be alleviated by the new loan. KamAZ expects to produce approximately 25,000 trucks this year and plans to produce nearly twice as many in 1996.
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