By on August 19, 2011


I know I’ve said this several times before, but the end really is near for Saab. The WSJ [sub] reports that Sweden’s Debt Enforcement Agency began auditing Saab’s finances after several debts came due earlier this week, and found only 5.1 Kroner ($796,291) in its Skandinaviska Enskilda Banken account. That’s barely enough to cover the 5.06m Kroner in debts that came due this week alone… and Saab’s total outstanding debt is ten times that amount, around 50m Kroner. And as if the financial trouble weren’t dire enough, key stakeholders are abandoning Saab in embarrassment, like Benny Holmgren, one of Sweden’s largest car dealers. Holmgren tells SvD.se that his contract to sell Saabs has expired and that he won’t renew, explaining

“For me, it is important to be proud of the brands that we have in our halls. Saab does not deliver cars they promised, they do not pay wages to their employees, nor debts to their suppliers while the owners pick out big money. It does not feel right for a [my] car dealers.”

But among the hardcore Saab faithful, today is not a day of sorrowful resignation… but a day of totally overblown and unrealistic hope for their dying brand. Yes, really…

Earlier in the week, Saab hinted at something it called “The Deal,” which would

“carry us through this near-term liquidity shortfall and into the future, so that we can re-start production and get back to being a car company again.”

Now, Saabsunited is hailing news that Saab has hired Endeavor Advisor Group to round-up some $350m in financing as “the deal,” and the end of Saab’s long nightmare. Not so fast. Saab hasn’t found money, they found an Investment Bank that is willing to take them on. It’s like a mortgage broker who is willing to accept your application. Except that these brokers, and that’s what they are, charge a hefty upfront-fee.   Then there is a “success fee.” Both fees rise quickly commensurate with the desperation of the customer. Desperation runs high.

According to a Wall Street banker we interviewed, “they probably talked to some of the bigger firms who did not take them. Endeavor probably won’t charge them a huge  upfront, because they don’t have the money. My guess is a $100,000 retainer a month.” When asked what the success fee could be, he said “this is usually capped at 10 percent, but the cap applies only to U.S. companies. As a foreign company – whatever it takes. However, if they really find an investor, he won’t want a huge chunk of his money go to some agent. So they’ll cut a deal.” His estimate was the deal would cost Saab in excess of $20 million plus “a good chunk of warrants for the bankers.”

After we explained that Master of the Universe Victor Muller had jetted around the world and came up empty-handed, we asked his guess for the chances of success: “In this climate? Those guys are [BLEEP].”

By signing the money-hunt over to EAG, Saab is simply admitting that Victor Muller’s round-the-world beggathon has yielded nothing and that it’s time to bring in the pros. But then, Victor Muller was supposed to be a pro when it comes to rounding up cash… and it’s not like he brought much else to the table, besides experience running a money-losing supercar firm. If Muller is giving up on his finance hunt, this may actually be one of the surest signs that Saab’s sad story is winding down.

The plan is for Endeavor to raise $350m, with which to buy out the EIB loan, which would then allow Vladimir Antonov to buy the stake he’s been wanting for some time. But there are a number of problems here: first, Endeavor has to find lenders and pitch them more successfully than Muller. Second, Saab has to survive for 60 days… and with the firm in default, it could be forced into bankruptcy court by the Debt Enforcement Agency when they meet next week. Finally, even if the EIB is bought out, Antonov still has to be approved by GM before he can buy in. Needless to say, the odds are against all of these things happening, and the most likely scenario is that Saab will be placed into bankruptcy court next week.

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23 Comments on “With Less Than $1m In The Bank, Saab Hits Up The Wall Street Loan Sharks...”


  • avatar
    segfault

    Debt Enforcement Agency? We could use one of those here in the States.

  • avatar
    bryanska

    This is the difference between Sweden, whose economy has been pretty sustainable for hundreds of years, and the US…

    They take their financial lumps and let their national brands die of natural causes.

    I am a patriot because I am raising my kids here, but I’m getting sad because nobody wants to shoulder any kind of real burden for the sake of the state. I’m talking real “go without” bipartisan burden on a national, suck-it-up-for-a-generation scale.

    • 0 avatar
      eldard

      Sweden’s external debt now stands at $835 billion.

      The trouble with socialism is that you soon run out of other people’s money. — Margaret Thatcher

      • 0 avatar
        Ingvar

        That’s not entirely accurate. It’s not like they are $835 billion in debt. The Swedish government, and by thus, the taxpayers, own assets equal to that amount or more. If you want to build a $1 billion dollar hospital, you take a loan for a billion dollars. On the one hand, you owe a billion dollars, on the other hand, you have a hospital worth a billion dollars.

      • 0 avatar
        eldard

        That’s accurate and no, they don’t. That’s almost twice the amount of their GDP.

        That’s what socialist paradises are. Swimming in debt.

      • 0 avatar
        Ingvar

        Lucky for you Sweden is not “run by socialists” anymore. Theý have a very free market oriented center to right wing liberal government right now.

      • 0 avatar
        eldard

        Which means nothing if their tax rates are still at sub 50%.

      • 0 avatar
        Tree Trunk

        Check your numbers again, Sweden has way lower national dept to GDP than the capital wonderland of Margret Thatcher, not to mention the good old US of A.

        http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt

      • 0 avatar
        eldard

        That’s just public sector debt. External includes both public and private obligations. Sweden is the 15th most indebted country in the world.

        http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

      • 0 avatar
        Tree Trunk

        But the private sector always does right, just as the government always does wrong, capitalism 101 according to the GOP.

        So private dept can’t be a problem right?

  • avatar
    GS650G

    The stock market is reeling right now, I don’t see VC lining up to rescue SAAB, unless they plan to mine gold or sell a lot of lemonade. A lot of blood has been spilled already, SAAB is not going to come roaring back selling 100K or 200K cars a year. GM cut the cord and that was that.

    A graceful end would be better than watching this tortured execution.

  • avatar
    Marko

    Let Saab die in peace! “Investors”, please stop torturing them!

  • avatar
    eldard

    They really should just call it quits and save themselves the embarrassment.

  • avatar
    philadlj

    Holmgren’s comments are pretty damning. Even if you do have the money to keep the company going, if no one will buy – or SELL – them, what’s the point?

    The more Saab gets tangled up with Russian mobsters, loan sharks, and (later) Afghan poppy farmers, North Korean counterfeiters and South American communists, the less any law-abiding parties will want anything to do with them.

    I say use the remaining funds to send the key Saab executives to Alcor, where they’ll be cryogenically frozen until a distant future when totally worthless car companies can make money.

  • avatar
    NorthwestT

    It’s too bad. Whatever value there was in the brand, product and potential product has been steadily pissed away. Sadly, it doesn’t matter how good the product or the development team is at this point. Spyker’s buyout was undercapitalized either due to poor judgment or because they thought they would bring on a major new investor in short order (maybe that also was due to poor judgment). When you think about it, GM’s takeover was undercapitalized, too. GM never put enough investment in (and certainly not with any clarity of purpose)to really do it right. The new 9-5 is a great car, but it should have hit the market at least by 2007 with any real commitment. Lord knows they needed a new 9-5 by 2005 at the latest. The 9-4 should have been on the market 3 years ago. The 9-3 should have had a Viggen or Turbo-X by 2005 as well. GM took what they could from SAAB without adding anything. Woulda, shoulda, coulda, but if a real investor with sufficient capital had been able to take over from GM in 2008 they could have built on the brand…now I’m afraid there isn’t a lot left to build on.

  • avatar
    MrWhopee

    Reminds me of a long running TV series that kept coming up with more and more bizzare (and unlikely) plot to keep things going. Maybe they need to look for people with lots of money, is a car enthusiast (and dream of owning a car company) but not a businessman per-se, maybe like the Sultan of Brunei or something. Some other corrupt dictators? The son of our former, corrupt president at one time owned Lamborghini. That’s the ideal SAAB investors. Lots of money, not so much business sense, as the money did not really come from business success. Real, professional investors like the one found on Wall Street? Unlikely.

  • avatar
    Pig_Iron

    SAAB could slip seamlessly into VAG. I think VAG is missing a fantastic opportunity.

  • avatar
    CurtInFalcon

    I certainly hope that this venture with Endeavor is not “The Deal” hinted at on Inside Saab. If this is the best that Saab can do, then it really is over. It appeared for a few days that a mysterious investor was ready to save Saab. If this is not true, then the fat lady is already warming up in the wings.


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