By on June 29, 2011

Almost two months ago, Saab was able to restart production after Gemini Investment Fund extended a €30m six-month convertible loan to the struggling Swedish automaker. Now, after another shutdown, it seems that Gemini has once again ridden to Saab’s rescue, as the company announces another six-month convertible loan from Gemini.

Swedish Automobile N.V. (SWAN) announces that it entered into a EUR 25 million convertible bridge loan agreement with Gemini Investment Fund Limited (Gemini), thereby securing additional short-term funding.

SWAN entered into a EUR 25 million convertible bridge loan agreement with Gemini with a 6 months maturity. The interest rate of the loan is 10% per annum and the conversion price is EUR 1.38 per share (the volume weighted average price over the past 10 trading days). SWAN may at any time during the loan’s term redeem it without penalty and it intends to do so once the funding from Pang Da and Youngman is received, in which case no dilution as a result of this bridge loan will occur.

Attention Chinese, Swedish and European Investment Bank regulators: you’d better cut through that red tape and approve the Pang Da and Youngman investments post-haste, or Saab will be back in the drink when these short-term loans mature. After all, hasn’t Valdimir Antonov been waiting for approval to buy into Saab since.. oh, 2009?

Before we dig into the latest Antonov-related nonsense, here’s what Saab CEO Victor Muller had to say about the most recent news:

I am relieved to report that we made the June salary payments this afternoon from the proceeds of the sale of cars we announced last Monday. We again extend our sincerest apologies to our employees for the hardship the late payment has caused to them. We have clearly gone through a very rough patch in the past few weeks and hopefully we can now reach agreement with our suppliers so as to ensure a resumption of our production in a controlled way. Our mid and long-term funding is secured by the Pang Da /Youngman agreements which are still subject to obtaining certain governmental approvals. Assuming these approvals are obtained, the Gemini bridge loan will be repaid in full.

But again, why would Saab be optimistic about getting approval for Youngman and PangDa any faster than they did for Antonov? If anything approval is more likely to be held up on the Chinese side, ala HUMMER. But even on the Swedish side, Saab and Antonov don’t seem to have many allies left. SaabsUnited notes that even though Sweden’s National Debt Office and GM approved Antonov’s stake in Saab “a long time ago,”  TTELA is reporting that Swedish Prime Minister Fredrik Reinfeldt  says the matter is in the hands of the NDO. This prompted an Antonov spokesperson to quip

Now I understand why the trial of Vladimir Antonov took such a long time. Reinfeldt seems pretty lacking insight into the Debt Office, which said yes to Antonov’s ownership over eight weeks ago.

But beneath the bitter humor, there’s a nasty truth: if everyone is saying yes to the Antonov stake, the Prime Minister must have some reason for saying no… and even if he doesn’t, his irrational opposition has been enough to delay the deal so far. Even the Swedes don’t understand what the deal is, and that’s got to be troubling Antonov and Saab. Sure enough, the recent announcement that Minister of Enterprise Maude Olofsson would be stepping down from politics prompted a “personal” letter from Antonov, in which the Russian states

I think you are the person who ensures that Saab is getting the political and moral support needed to weather the storm

And with Olofsson leaving, Swedish authorities could cancel the recent real estate deal, or any other of the deals Saab currently has pending government approval… and Antonov’s letter (described by Olofsson’s secretary as “nice”) shows how worried he is. But if the letter showed signs of Antonov’s desperation a new rumor, if true, confirms that Antonov believes the Swedish government is totally against his involvement and will go to any lenghts to support Saab. According to SaabsUnited‘s parsing of a Dagens Industri report

Antonov will take ownership of GM convertible (lost in translation: redeemable preference?) shares. The value of this is reported to be 2.3 billion SEK (about €248 million), but GM is offering Antonov a substantial discount– between 800 and 900 million SEK (€86-97 million).

When Vladimir tried to buy and lease back Saab’s factory, I was in awe of the generous nature of the deal– it meant he could be a part of Saab’s future, but wouldn’t have any formal ownership in the company by name. Somehow, the EIB and Swedish government still got in the way of the deal. Not deterred, he’s back with another €80-90 million to buy 0.0005% of the company. He’s basically paying GM off in this scenario, taking away one of Saab’s largest creditors, and helping out their future cash position. In other words, he’s saving the day in a very big way for Saab if he’s successful– by taking on their debt. [Emphasis added]

Now, this could easily be wishful thinking… after all, it’s one thing to want to invest in a dying niche automaker, but it’s quite another to pay over $100m to GM simply as a way to take some debt off of Saab’s books. Especially if GM is cool with him investing anyway… and if it weren’t, it wouldn’t be offering this deal. But if this is rumor is for real, it shows that GM is anxious to drop its exposure to Saab, and that Antonov is so emotionally committed to Saab, he’s willing to personally assume over $100m of its debt. And you know what? After all the twists and turns that this story has taken, this wouldn’t even surprise me.

To paraphrase an old communist joke, there are two ways to save Saab: the difficult way and the impossible way. The difficult way is that the archangel Michael descends from heaven and magically fixes everything. The impossible way is that Saab builds a strong business case, starts selling lots of cars and attracts rational investors.

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28 Comments on “$36m Bridge Loan “Saves” Saab, Workers Paid, Production Could Resume. So What’s Sweden’s Problem?...”


  • avatar
    gslippy

    “…there are two ways to save Saab: the difficult way and the impossible way. The difficult way is that the archangel Michael descends from heaven and magically fixes everything. The impossible way is that Saab builds a strong business case, starts selling lots of cars and attracts rational investors.”

    Perfectly stated. There are too many moving parts in these deals to believe Saab has any chance of survival.

  • avatar
    seth1065

    The Zombie lives another day to hopefully make some more cars.

  • avatar

    Maybe spending billions of dollars to “save” the UAW (and, ostensibly, GM) wasn’t the most wasteful use of capital we’ve ever seen.

    The Saab suckers have raised the throwing of good money after bad to the level of a Dark Art.

    • 0 avatar
      CJinSD

      +1 They’d migh as well give me 30 million euros. I’ll pay the taxes and give them back 5 million more than they’ll ever see as a return on their ‘investment’ in Saab.

  • avatar
    CurtInFalcon

    Saab can be saved but it’s going to be terribly difficult. The property lease deal needs to be quickly approved by the Swedish government and the European Independent Bank. The deals with Saab, Pang Da/Youngman must be approved by the Chinese government within a couple of months. And, to top it off, the EIB must approve another draw down on another loan. Victor Muller is juggling so many deals and must have everything go his way just to ensure Saab survives another year. But we get to the real bottom line – Saab cars are not selling and without that no additional money will come in. Saab may have staved off immediate bankruptcy, but really cannot survive long term. The future for Saab is to have everything owned by the Chinese, ala MG/Rover, and their cars only sold in China.

  • avatar
    segfault

    Why did the Swedish government get in the way of anything? They should be pouring more and more money down the tubes, just like the US.

  • avatar

    Governments need to just let the carmakers die if they can’t manage their money.

    • 0 avatar
      Seán Moloney

      If the governments were to just let car makers die then we wouldn’t have a car industry at the moment. Every country (government) who has a car industry had to pour money into them during the financial crisis, otherwise they all would have disappeared. The only government that didn’t assist its auto industry is Sweden. Volvo got Chinese government support when it was sold to Geely, but Saab got nothing from anybody and had to beg for mercy to the EIB who granted them a loan, however this loan is preallocated money that must be used for EIB approved tasks, and this does not include the day to day running of the company. Therefore until Saab finds it’s feet (if it does, it will be after the new 9-3 is introduced) it has to raise its own funds through further loans, selling off assets and joint ventures, all of which would be a lot easier if the Swedish government would stop twiddling their thumbs and actually do something.

      • 0 avatar
        Paul W

        I don’t think you managed to get a single sentence factually correct. In short: Not all car companies were in need of a bailout, GM received one, but STILL had to drop Pontiac, Saturn, Hummer and… Saab. You’re talking about Saab finding its feet, and that’s the problem – Saab has a long history of never being able to do that. This is not a temporary set-back. Saab isn’t a Swedish company. Saab never found a serious investor because no serious investor would be interested in Saab – it’s not the Swedish governments fault Spyker bit off more than they can chew and doesn’t have the capital necessary to run a car company. I don’t understand this urge to give tax payer money to Victor Muller who is a compulsive liar and has been convicted of financial fraud.

      • 0 avatar
        Seán Moloney

        Actually GM received more then 1 bailout. The US government may have only given GM one bailout but Australia gave GM Holden a bailout, and I’m pretty sure GM Opel got assistance from the German government. All I was saying is that while most other car makers got government assistance Saab did not. Even when Saab was part of GM the Swedish government refused to offer a bailout.

      • 0 avatar
        Paul W

        Saab was/is not bailout worthy, it’s as simple as that. Saab belongs to the same group of doomed GM brands as Pontiac, Hummer and Saturn.

      • 0 avatar
        Seán Moloney

        And that, sir is your opinion and you are entitled to have it. My opinion however, differs from yours greatly. I believe that Saab was/is bailout worthy, why? Because it has a flood of new products that have just been or are about to be released, because it has an existing dealership network worldwide, because it’s production facilities are rated as some of the most efficient in Europe (thank you GM for one good thing).

        The fact that Saab hasn’t had a new product in years is not Saab’s fault. When Saab launched the 9-3 SportCombi in 2006 it had the 9-3X ready to go, but GM stopped that as they had decided that the Epsilon platform that the 9-3 was built on would not offer AWD technology, a decision they reversed later on. In 2005 Saab had an all new 9-5 ready to go, but GM scrapped it and instead limited Saab to a new facelift for the original 9-5.

        GM wanted Saab to be their true European luxury brand, but they never gave them the ability to reach their full potential. People judge Saab currently by their most recent product. Ie the 9-5, which is still a GM product. Give them a chance to show what they are truly capable of. The all new 9-3 is due to debut at the Frankfurt International Motor Show this September (I believe it’s due to begin production the following March), then we will see what Saab is capable of as an independent company

      • 0 avatar
        Paul W

        “And that, sir is your opinion and you are entitled to have it.”

        No, it’s not simply MY opinion. It’s the conclusion everyone except a few Saab fanatics reach after studying the facts. Saab has never had any sustainable success no matter the ownership. The company was in awful shape when GM took over, and it probably deserved to die right then and there. Claiming it it’s the Swedish governments duty to inject the company with tax payer money with this in mind is just absurd, especially when you consider that competition on marketplace is even tougher now.

    • 0 avatar
      DC Bruce

      An absolutely correct statement. With everyone agreeing that there is an excess of production capacity/supply in the auto business, everyone’s long-term welfare is best served by letting the marketplace — not governments responding to political imperatives — decide who lives and who dies.

      Saab is the poster child for that proposition, having never made any money even under GM’s ownership. At least in the U.S., Saab’s brand equity is close to zero. It is trying to compete in a crowded market segment where other European marques have more brand equity and/or offer a better value at the price and where Japanese (and, now Korean) compete very successfully on price, if not on snob appeal.

      When I bought my 9-5 wagon in 2002, it was a value proposition because the price that I paid was thousands less than any wagon from Volvo, Audi, BMW or Mercedes. The problem was, the price that I paid was an economic loss for Saab.

      • 0 avatar
        Seán Moloney

        “having never made any money even under GM’s ownership.” This statement is not true, Saab turned a profit in 2009 and also turned a profit in the early 2000’s I think it may have been 2002. I’m not stupid, I know that Saab’s brand value is basically zero at the moment, but obviously some see potential in the brand otherwise they wouldn’t be willing to invest (Youngman, Pang Da, Vladimir Antonov, Gemini etc.). Saab has a lot of work to do to turn itself around (if this is achievable remains to be seen.)

        As for not being able to maintain a sustainable profit under GM. Well any company that is underinvested in and product starved will always have turbulent times.

  • avatar
    majorfrn

    Plenty spunky outfit.

  • avatar
    DDayJ

    Bridge loans are always higher risk situations, but financiers rarely enter into them without some reasonable diligence and structuring to ensure that their short term investment will be repaid, with a high premium for the risk. Gemini is clearly working to protect their original investment, but must still see something in the company. Saab may be ok…for the next few months. I do have to say I’m impressed with Saab’s ability to keep this thing going.

    EDIT: It also makes me wonder what Gemini sees/saw in Saab to invest in the first place, and then to add a follow on investment. Gemini is not a firm to throw good money after bad. Good things on the horizon?

    • 0 avatar
      snabster

      secured assets.

      I read the parts sales alone generate 30M a year in cash. and saab is probably sitting on close to 100M in parts.

      pensions?

      real estate?

      cars?

  • avatar
    Tstag

    Nowadays most European Governments (with the exception of France) don’t bail out their car companies (partly because it’s largely outlawed in Europe).

    We leave state bailouts to communist countries…….

  • avatar
    MOSullivan

    GM took $326m in preferred shares as most of the payment for SAAB. They are to start paying a dividend in 2012, at 6%, which will be added to the principal. Cash dividends are to start in 2013, rising to 12% in 2014. SAAB/Spyker (or whatever it’s called now) must redeem the shares at the end of 2016. Missed dividend payments plus a penalty are to be added to the principal. Assuming this were to happen it adds up to $500m in dividends and principal.

    The cash flow is attractive. I can understand why Antonov would go for it, especially if he can get the shares for a discount. What I don’t understand is where the cash flow would come from. Shurely not SAAB?

    • 0 avatar
      snabster

      the latest analysis suggests GM wants out of that payment, and is the one forcing Antonov to buy their shares out.

      I’d assume the cash flow projections are being made on sales of about 120K cars a year. Between the 9-4, 9-5 and a new 9-3 that might be within possibility.

      The two elephants in the closet, which Bertel and Ed don’t want to touch, is payments to GM for building the 9-4, and payments to BMW for engines. I can’t imagine either of those companies like to many financing tricks.

      Let’s also point about the Victor Muller knows more about how to raise money that a bunch of bloggers. I’ll give you his car industry knowledge may not be great, but the dude knows how to deal….

  • avatar
    JMII

    They really need to pull the plug already and just let Saab die. Sell the name to some Chinese off brand then use that coin to pay the outstanding bills and call it day, last one to leave shut the lights off. Sad… but given the current economic conditions pouring cash into a niche automaker doesn’t make much sense.

  • avatar
    Darkhorse

    Uh oh. Now where do I find parts for my 9-3? Also, independent SAAB mechanics are few and far between.

    • 0 avatar
      Pig_Iron

      Lurk the SAAB sites. See who the old hands on the forum boards are. Post in high traffic part of the board. Let them know where you are, your year and model, and ask them to direct you to someone in your neck of the woods. There used to be lots of euro specialist shops, but a lot of those guys have retired and closed down.


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