With Less Than $1m In The Bank, Saab Hits Up The Wall Street Loan Sharks
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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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.