$36m Bridge Loan "Saves" Saab, Workers Paid, Production Could Resume. So What's Sweden's Problem?

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.