Amtel enters yet another new phase of restructuring

ERJ staff report (DS)

Amsterdam, Netherlands -- Russian tyre maker Amtel Vredestein has a new board (one man alone), a new name and a new set of proposals for financial restructuring, following an extraordinary meeting of shareholders -- the second EGM of 2009 -- held earlier this week in Amsterdam. Day to day management is in the hands of its main creditor and shareholder, Alfa Bank.

Creditors to Amtel are likely to face a choice of either converting their debts into equity in a new company and then be faced with further cash calls to fund a resurrection, or to suffer from discounted debts and extended payment terms with no long-term guarantee they will get all their money back.

The company's troubles have been made significantly worse by the global economic downturn. Sales of tyres in Russia fell roughly by half in the first half of this year, and this substantially affected the already-limited financial viability of Amtel. A spokeswoman confirmed that the company is now being run by representatives of Alfa Bank, but said it is too early to say how things will turn out.

The company is to be re-named Amtel NV, following the sale of Vredestein Banden BV to Apollo Tyres. Also, the former directors, Petr Zolotarev and Vadim Pesochinskiy have been dismissed, with Alexander Fain, a senior executive with Amtel's main shareholder, ABH holding (Alfa Bank), replacing Zolotarev as chief executive. Fain is now the sole member of the management board of Amtel.

Prior to his dismissal as CFO, Pesochinskiy reported on Amtel's financial results for the three months to March 2009. He said sales fell by 47 percent in the period, due to the downturn and production stoppages at its two main factories in Voronezh and Kirov. The company reported a net loss of US$35 million in the period.

The administrator, Mr JA Daniels also gave a brief summary of his efforts during the period from 20 April to 20 August, in which he noted that the main shaeholder and creditor, Alfa Bank is making a further attempt to restructure the finances of the company.

Alfa Bank said in its presentation that previous attempts to rescue Amtel have all failed, leaving every main associated and affiliate company in bankruptcy proceedings, and senior management who want to leave immediately. Furthermore, working capital and investment capital are severely restricted. That situation is made worse by a sharp decline in demand for tyres in Russia, combined with aggressive competition from other Russian tyre makers, such as Sibur-Russian Tyres.

This situation means only a company with a strong vested interest has any hope of rescuing Amtel, and thus Alfa - the main shareholder and creditor -- wants to take sole control of the company with the aim of salvaging as much as possible from the existing situation.

Alfa also noted that production at the Voronezh factory is frozen, while production from Kirov is irregular at best. Amtel's Av-To retail chain is making significant losses.

Alfa estimates Amtel needs around $30 million in working capital to get it going once more. Though it has to be noted that over the last 18 months or so, this amount of capital has been injected, yet it was not enough to kick-start the company, which remains almost frozen.

Alfa further estimates that the Voronezh II plant needs $50 million to get it operational. This seems high, in comparison with similar new build projects, given that the factory is built, all machinery except the mixing room is installed and the mixing room equipment has been purchased, and is awaiting installation.

Alfa proposes that creditors turn their debts into equity in the company. The shareholders would then jointly finance the resurrection of the company as a builder and seller of tyres.

For those creditors who choose to take cash instead, there would be standard terms involving discounts on the debt, long-term maturity dates and interest rates. These creditors would have to sign a settlement involving these factors.

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Press release from Amtel

Financial affairs update, presentation by Vadim Pesochinskiy, CFO (181 kb)

Bankruptcy Trustee report (154 kb)

Alfa's Preliminary Ideas on Financing and Restructuring of Amtel (192 kb)