By on August 31, 2011

Bloomberg [via the Financial Post] reports that “one of the five biggest European banks” is “close” to loaning Saab $157m  so that it may pay workers and suppliers, in order to move towards restarting production. According to DI.se, the deal is predicated on Saab securitizing the loan with shares of Saab Great Britain or other “alternative assets.” But apparently whatever the banks ask for, Saab will try to give, as Theodoor Gilissen Bankiers analyst Tom Muller explains

They need the money immediately. I hope they solve it this week, otherwise I think it’s over for Saab. It’s a very dire situation.

He’s not kidding…

Even in a “nuclear winter” scenario, Saab needs about $50m per month to keep the lights on. Add about $8m for supplier debts already logged with the kronofogden, and Saab might hold off bankruptcy for another week. To restart production, however, it needs to spend anywhere from $30m to $60m in order to pay off its entire estimated supplier debt. And get this: according to Bloomberg, Swedish Automobile’s market capitalization on the Dutch exchange is under €18m (about $26m at current exchange rates), but it’s still waiting on €245m (about $353m) from PangDa and Youngman in a deal that would value the company at over half a billion dollars. This looks quite a bit like a bridge to nowhere…

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30 Comments on “Saab “Close” To $157m Bridge Loan, Situation “Dire”...”


  • avatar
    CamaroKid

    Delaying the inevitable. SAAB is toast. RIP

  • avatar
    ott

    Even if Saab gets their immediate debts paid off, and even if production can resume, how many new car buyers would seriously have enough confidence in this company to shell out $40,000 for a new Saab?

    Not many, is my guess…

  • avatar
    30-mile fetch

    It makes me a bit sad to think that Saab will disappear. It used to be such a funky car brand. I think of my father’s 1979 900 4-door hatchback turbo and get all nostalgic. You could hear that distinctive turbo whine coming up the block.

    Then I think of how recent Saabs were a GM subsidiary and wonder whether I am just mourning the death of a hood emblem rather than an actual car.

  • avatar
    saab_lurker

    Saab cannot die fast enough for TTAC. The ad revenue must be nice, though.

  • avatar
    belfagor

    Saab will not disappear. The company will liquidate all assets to pay off part of the liabilities. Someone will buy the brand name (probably the biggest asset at this point! maybe worth $10M) and start re-badging their cars as Saabs. I bet some obscure Chinese auto firm will do it.
    Of course they won’t be real Saabs anymore, but those disappeared anyway long time ago thanks to GM.

  • avatar
    saabista63

    If SAAB really gets the production line moving again, prospects are not THAT bad.
    There are some 11.000 cars in the order books, and there will be more orders, as soon as cars start rolling out of Trollhättan again.
    There are two new cars (9-4X and 9-5 estate) on the market, and there is a new market (China) being opened and another one (Russia) on the way.

    So, it seems there is now one more inch between loathing and eulogy!

  • avatar

    Go on any new Saab lot. The cars have always been and are still hugely different than anything else on the market, including GM vehicles, the discontinued 9-7X Trollblazer nonwithstanding.

    I often think that the worst thing Saab faces aside from financial issues is their so called “fans” themselves. People who proclaimed their love for the company yet turned their noses up at every good product they offered. Those who laughably think Saab could have existed all this time as a standalone operation and not part of a conglomerate like GM, whose ownership enabled them for the past decade if not longer. Saab would have been toast before Oldsmobile without the deep pockets and a global parts toybox to get all their parts from. Look at Opel and Holden which are operated no differently than Saab, both produce very distinctive automobiles, how was Saab any different? It wasn’t, Trollhatten still was in charge of their own designs and engineering just as Opel and Holden are. That says more about the leadership at Saab more than anything else.

    Saab was the last GM name to recieve huge investment and an emphasis on design, but that effort really shows in the 9-5 and new 9-4X, both of which are thoroughly GM vehicles but exhibit GM’s massive effort to make each one of their products look, feel and drive unique from each other. One thing is for sure, when the day comes there will be some incredible deals on some incredible, handsome and very unique vehicles on Saab lots.

    • 0 avatar
      gslippy

      Sorry, I see nothing distinctive about a Saab except for its crazy high price. They offer nothing distinctive in features, performance, economy, ergonomics, appearance, safety, utility, or value. Hummer was distinctive; Saab is not. They’re not even quirky anymore.

      With the average price of the Saabs languishing on my local dealer’s lot hovering around $45k, you’ve gotta have something special to move that metal.

      • 0 avatar
        saab_lurker

        Your local dealer must be selling a lot of 9-5 Aero’s at MSRP.

        A dealer here in the Philadelphia area has 2011 9-5′s for $31k and 9-3′s start at less than $29k. Less than a 3-series with cloth seats.

        If Saab captures just 1% of the US car market it will be successful beyond expectations. Doesn’t seem impossible to me.

      • 0 avatar
        Pch101

        If Saab captures just 1% of the US car market it will be successful beyond expectations.

        Saab’s peak US market share was during 1986 and 1987, when it hit 0.30%.

        For Saab to hit 1.0% market share, it would have to increase its 2010′s sales by a factor of 20. And in order to hit 1%, it would have double the sales of Volvo.

        Doesn’t seem impossible to me.

        It should. And it is.

      • 0 avatar
        saab_lurker

        @Pch101: In 2003 0.63% of the cars sold in the USA were Saabs. Your 0.3% stat probably included trucks (which would be valid if Saab sold trucks).

        Whatever the number is, it’s a low market share and not impossible.

        And I though I was a pessimist.

      • 0 avatar
        Pch101

        In 2003 0.63% of the cars sold in the USA were Saabs.

        According to Wards, Saab’s US market share in 2003 was 0.28%. That’s less than half of what you are claiming.

        http://wardsauto.com/keydata/historical/UsaSa28summary/

      • 0 avatar
        saab_lurker

        @Pch101: Again, that figure includes trucks.

      • 0 avatar
        Pch101

        Again, that figure includes trucks.

        I don’t follow what that is supposed to mean. The figure that I have is based upon passenger car and light truck sales. If you’re thinking of Scania, it is a different company.

        In any case, your 1% target is pretty much out of the question. Saab’s US market share has never exceeded 0.3%. Many a business has failed in the belief that it would be easy to get 1%.

      • 0 avatar
        saab_lurker

        @Pch101: 48,000 Saab cars imported in 2003. 7,611,000 cars sold or leased in the USA in 2003. 48,000/7,611,000=0.006307.

      • 0 avatar
        Pch101

        7,611,000 cars sold or leased in the USA in 2003.

        Try 16,639,700.

        If you want to cherry pick your numbers by skipping over light trucks (which include minivans and SUV’s), then you’re really kidding yourself. Those types of vehicles are included in the SAAR.

        http://www.nada.org/NR/rdonlyres/E506ECDD-CC53-486B-9480-01BFF217EFC2/0/NADA_Data_2004pdf.pdf

      • 0 avatar
        saab_lurker

        @Pch101: “If Saab captures just 1% of the US car market it will be successful beyond expectations.”

        How is it cherry picking? I didn’t say 1% of the US vehicle market.

        Can we end this inane argument?

      • 0 avatar
        Pch101

        I didn’t say 1% of the US vehicle market.

        The car market includes light trucks. The split between them varies but is roughly 50/50.

        If you want to claim that it’s possible for Saab to hit 0.5% of overall US market share or 1% of the overall passenger car market, then I will repeat — this has never happened before. I see no plausible plan for making it happen now. If it was so easy, then I would think that it would have already happened at least once over the last 40 years, but it never has.

      • 0 avatar
        saab_lurker

        @Pch101: Looks like I’ve won you over. Implausible, but not impossible.

      • 0 avatar
        Pch101

        Looks like I’ve won you over.

        I do hope that was sarcastic.

        Implausible, but not impossible.

        Given the current situation, it is absolutely impossible.

    • 0 avatar
      AMPKinase

      Please, do tell me what is so distinctive and quirky about SAAB. I’d really love to know. All I see is an Opel that’s been gussied up…heck, the hatch is gone and that’s all I really like about the old
      Saab 9-3/900…

  • avatar
    saabista63

    TriShield,

    I don’t agree in all points, but it is a fact that without GM, there would be no SAAB now, and thus no prospect of SAAB in the future.

  • avatar
    92golf

    I’ve never been in a tax bracket that would allow me to afford a Saab, especially a new one, but let me put in a plug for the new 9-5 sedan, and the probably never to be seen 9-5 SportCombi.
    I think they are really beautifully styled cars.

  • avatar
    Its_Magic

    Saab Automobile cannot securitize Saab Great Brittain for a new bridge loan:

    As per June 2011, Saab has received pre-payment from customers amounting to €60.5 million. € 58 million of this amount relate to prepayments of cars from Chinese companies during the second quarter, whereof €45 million were received from Pang Da. These agreements stipulate that the car sales agreement can be terminated by the buyer with not less than six month notice. In the event of termination, the amount should be repaid within six months from termination at 7% interest. The prepayments from Pang Da are secured to Pang Da through a pledge on the shares of Saab Great Britain. In the cash flow statement the amount is included in “Change in current liabilities”.

    And have you guys seen the semi-annual report? In 6 months time a loss of 224 million euro. And in Q2 alone a loss of 150 milllion. So they burn at least 50 million euro (not dollar) when the factory is at a standstill.

    http://www.spykercars.nl/download/investor/2011.08.31_Swan_HY_report_2011__fin__20110831.pdf

  • avatar
    gslippy

    Analyst Tom Muller says “I hope they solve it this week.”

    So do I – by closing down this ridiculous drama with a liquidation.

  • avatar

    Also of interest (emphasis mine):

    “On February 24, 2011, Swan announced that it had signed a memorandum of understanding to sell the assets of the Spyker Automotive business to the private UK holding CPP Global Holdings Limited. The sale has been suspended as of the date of this report. Swan is still in discussion with the potential buyer regarding the transaction, but might also consider other alternatives for the Spyker sports car business.”

    CPP is owned by Vladimir Antonov, and the sale of the sportscar business to Andropov was widely seen as a backdoor to allow Andropov to invest into Saab, which he was barred from via the EIB loan agreement. It looks like hero Antonov has bowed out of that deal also.

    Further of interest:

    “Throughout the second quarter, Swan worked on Saab Automobile’s short-term financing through a number of activities, among which a convertible loan with Gemini Investment Fund Limited which was issued in May and the sale of 50.1 percent of the shares in Saab Automobile Property AB for a consideration of EUR 28 million which was finalized early July. In addition, a Chinese company placed an order to purchase 582 Saab vehicles with a value of EUR 13 million. Unfortunately, these agreements did not provide sufficient funding to finalise negotiations with suppliers and secure a sustainable restart of production; also, some of the funds committed by investors have not yet been paid. Swan and Saab Automobile continue discussions with several parties about obtaining additional funding for both the short, medium and long term in order to strengthen Saab Automobile’s financial position.”

    It has always been my stated position that these transactions are as much a cure for Saab’s ills as morphine for a terminally ill cancer patient. Anyone with a basic understanding of math could figure that out. It is interesting that even the touted sale of cars to Pang Da can be terminated by the buyer, and that the cash advance is securitized with Saab Great Britain shares.

    What we have here is a desperate Saab that takes whatever it has to the pawn broker. Whoever loans Saab money seems to be doing so on the assumption that it will go under, and that the value of the security exceeds the loan by a big margin. If a large bank indeed will give them a $157 m loan, they probably want it securitized for $300 m. From what assets is the big question. The mid-term report asks the same question:

    “Management is responsible under IFRS to evaluate, on a periodic basis, whether the value of fixed assets can be maintained in the balance sheet based on the business ability to generate cash from its future operations. Due to the recent events, including the significant production stoppage, Management recognizes that the business plan used as the base for the last evaluation is no longer valid and that the assets might be impaired. However, the current uncertainties described in this report make an adjustment of the asset value difficult to complete at this time.”

    Finally, Saab’s hopes dangle off a thin and frayed silk thread:

    “Management is of the opinion that the continuity of the Group can be secured based on the conditional EUR 245 million agreed investment by Pang Da and Youngman and based on the interest shown by investors to provide further short-term funding as is currently under negotiation. Management has accordingly prepared the financial statements on the assumption that the Group will be able to continue as a going concern. However, if adequate funding for the Group cannot be secured timely, going concern can likely not be maintained. Management is evaluating all available options in order to secure continuity of Saab Automobile.”

    Meaning: If the Chinese bow out or cannot get the necessary government approvals in time (for a Chinese regulator, doing nothing is the best option for now,) those nasty “all available options” (euphemism for bankruptcy) will go in effect. Whoever loans money to Saab at this time does it with pledges of Saab’s remaining assets. The final dismantling of Saab has begun a while ago. The sale and leaseback of the Saab property sounds like one of the better deals – for the buyer.

    The balance sheet looks nasty.


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