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VTB Factoring, SOLLERS open Russian ABL market with RUB 200 bn transaction

28 September 2015

VTB Factoring, SOLLERS open Russian ABL market with RUB 200 bn transaction .

VTB Factoring and Ulyanovsk Automobile Plant (UAZ) have signed a number of asset-based lending (ABL) agreements to finance annual deliveries of up to 50,000 UAZ vehicles to authorised dealers. The funding will total approximately RUB 200 billion over seven years.

The deal was implemented using new solutions in VTB Factoring’s product line.
ABL is a type of non-bank trade finance that first appeared in the US in the 1980s. It comprises a range of services, including financing secured by accounts receivable, tangible and intangible assets and the management of a portfolio of receivables.

ABL differs substantially from classical factoring in that funding is provided against a significantly broader range of assets. It is an innovative product not only for the Russian factoring market, but also in many European countries. In most European countries, the ABL financing market has existed for about 10 years.
VTB Group has a long strategic partnership with Sollers Group, providing a wide range of products and services including lending, cash-management, servicing of foreign-trade contracts, trade-finance transactions, leasing and factoring.
The new cooperation scheme between VTB Factoring and UAZ involves factor acquisition of vehicles and transferring them for sale under an agency agreement.
The mechanism will provide favourable financing terms to all UAZ dealerships, which guarantees that all UAZ models will be available to clients on the best financial terms.

Nikolai Sobolev, deputy CEO and CFO and a member of the Sollers Board of Directors, said: «Given the challenging situation on the Russian automotive market, we faced the task of providing the most competitive offer to UAZ buyers. One of the issues was financing the dealer network: in 2015, the cost of the SME lending segment, which includes our dealers, increased sharply. Dealers were unable to obtain loans even at high interest rates. We asked VTB to provide 100-percent financing to UAZ dealers on acceptable terms. Again, we were convinced that we made the right choice of financial partner. VTB analysed international practices and implemented VTB-based ABL factoring, which will fully meet our needs.»

Sollers is a leading player on the Russian automotive market.
«The deal to provide VTB Factoring financing to deliver UAZ vehicles to dealerships will improve not only the automaker’s efficiency, but the entire Russian auto industry," First Deputy President and Chairman of VTB Bank Management Board Yuri Soloviev said.

Anton Musatov, CEO of VTB Factoring Ltd., said: «Sollers is VTB Factoring’s most progressive client. In 2014, for the first time in the history of the Russian factoring market, we conducted a joint factoring deal involving fully digital factoring based on electronic invoices. In 2015, we have brought asset-based lending to Russia. This means we will be able to cover up to 100 percent of UAZ dealers’ financing needs. ABL can significantly reduce VTB Factoring’s operating risks, which, in turn, is reflected in the cost of funding and makes it possible to finance sales while retaining the advantages of a classical non-recourse factoring. We expect high demand for ABL financing from automotive manufacturers and companies from other sectors of the economy.»

SOLLERS is Russia’s leading automotive company working in partnership with international automobile industry leaders, such as Ford, SsangYong, Mazda and Isuzu. Its annual turnover is 47.9 billion roubles. SOLLERS owns production facilities that manufacture Russian UAZ off-road vehicles, Korean SsangYong cars,and Japanese ISUZU trucks, as well as petrol and diesel ZMZ engines. In 2011, a joint venture between Ford and Sollers became operational, which is in charge of making and selling a wide range of Ford vehicles in Russia. In 2012, in Vladivostok, the company started making Mazda CX5 under the MAZDA SOLLERS joint venture.
VTB Factoring — a subsidiary of VTB Bank — has provided factoring services since 2009. The company operates through offices in 18 major Russian cities. VTB Factoring is a member of the major international IFGroup factoring association and the Association of Factoring Companies.

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