OREANDA-NEWS. October 2, 2009. Basic Element believes that Alfa Bank, a minority lender to Basic Element's portfolio of companies, has misrepresented the current state of affairs between the two companies, been absolutely unconstructive and behaved contradictory to standard business practice in restructuring negotiations.

Alfa Bank have continued to demand exceptional and absolutely unacceptable conditions for itself. The bank's claim that it does not link the restructuring of GAZ's loan to the settlement of other debts owed by Basic Element companies is an attempt to distort actual state of affairs. It has made every effort to tie restructuring agreements with some of Basic Element's companies to the settlement of the group's other borrowings. In addition, Alfa Bank has actively used the courts and the possibility of bankruptcy proceedings in an attempt to pressurize Basic Element.

We interpret Alfa Bank's actions as absolutely unconstructive and contradictory to standard business practice. It is an attempt to take advantage of the tough economic situation for its own benefit, and to the detriment of other companies, their employees, creditors and the state itself. The fact that Alfa Bank is the only lender out of 18 to reject signing a restructuring agreement with GAZ Group further demonstrates the bank's negative approach to the restructuring process and its key borrowers.

Alfa Bank's attempts at bankrupting elements of the company are destined to fail and will not hinder Basic Element's broader efforts to restructure all its debts or its plans for further sustainable development.

Basic Element sees the fulfillment of its loan commitments as an absolute priority for all its companies. However, it is apparent that the true intentions of Alfa Bank do not coincide with those of other creditors. This is evident from the fact that Alfa Bank is attempting to buy the debt obligations of Basic Element companies from third parties to strengthen its position as a creditor.

The statement released by Alfa Bank also contains further inaccuracies about the structure and obligations of Basic Element holdings. Contrary to their statement, Alfa Bank accounts for only 8 percent of GAZ's total debt of 39Bn Rubles. Furthermore, Russian machines is a shareholder of GAZ Group not a subsidiary as suggested. Russian Machines and GAZ Group are operationally and financially independent companies and GAZ Group cannot be held liable for Russian Machines obligations.