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AvtoVAZ seeks state loan to offset weak sales

Russia's largest car maker, AvtoVAZ, has asked the state-run VEB bank for a $1 billion loan to compensate for shrinking sales hit by the credit crisis, a Russian newspaper reported.

Kommersant business daily quoted banking and industry sources as saying that AvtoVAZ, in which France's Renault owns a quarter of the shares, has 100,000 unsold cars, or around two-months of output, amassed in its storehouses.

The government decided earlier this week to channel $50 billion from its foreign exchange reserves to help companies refinance foreign debts as the global financial crisis virtually closed capital markets. The money will flow via VEB at no lower than LIBOR plus 5%.

VEB has said it already received over 35 applications, exceeding $50 billion, but AvtoVAZ is the first Russian company to ask for state funds to replenish means for turnover, not to refinance debts, Kommersant said.

VEB is likely to take the decision on AvtoVAZ request early next week at a meeting of the bank's supervising committee. (Reuters)