OREANDA-NEWS. February 17, 2010. Avtovaz could have part of its debts written off, which, in our view, would lead to a redistribution of its value in favor of shareholders. However, the negative attitude adopted by banks lowers the possibility that this option will be approved.

Citing sources close to the negotiations, mass media outlets reported on plans to restructure the carmaker’s debt liabilities to banks at a discount. The debts are now estimated at a total of around RUB 38 billion.

In our opinion, the news is positive for Avtovaz shareholders. Forgiveness of part of the debt would, in effect, lead to a redistribution of the company’s value in favor of shareholders. In addition, the alleviation of its debt burden would mean lower interest payments on those debts. However, this option has run into stiff opposition from banks, which adversely affects the possibility that the issue will be decided in Avtovaz’ favor.