Our Daily Saab: Another Day, Another "Rescue"

With both China’s NRDC and Sweden’s NDO appearing unready to approve the Chinese takeover of Saab before a Halloween bankruptcy deadline, it seemed that Saab was properly borked. Without Vladimir Antonov or Gemini Investment Fund to hit up for yet another “bridge loan,” we fully expected to see Saab placed into bankruptcy a week from Monday. But if Saab’s parent company, Swedish Automobile, had found a private equity fund that was gullible enough to rush in where Antonov feared to tread and drop $44m on Spyker… well, we should have known that North Street Capital would be fool enough to get sucked into the Saab maelstrom. And sure enough, Reuters reports that

The private equity firm of racing car enthusiast Alex Mascioli, which bought the luxury sports car business of the Dutch owner of Saab in September, is to invest $70 million in the cash-strapped car maker as Chinese bridge financing looks uncertain.

Here we go… again.

Still not convinced that the situation is dire? Consider Swedish Automobile’s official response to the North Street offer:

Swan intends to accept this offer because it has doubts that the bridge funding of Youngman and Pang Da, of which a partial payment has been received, shall be paid in full on 22 October 2011. Immediate availability of funding is necessary to continue the reorganization process of Saab Automobile.

Saab had previously said it expected approval from the NRDC on the 14th of October, an estimate it backed away from… on the 14th. Clearly Saab has to keep the drama going, but if it now admits that the money likely won’t come by the 22nd, what does that mean? As Bertel has been saying for months now, Saab could be waiting forever: the NRDC doesn’t say “no,” it just waits until you give up or die (see: Hummer).

But at least Saab has another bridge loan to nowhere. Although, to be clear, even that’s not a done deal. Per Saab’s release

Procurement of a loan to Saab Automobile in the amount of USD 60 million to be collateralized by a first lien on certain assets of Saab Automobile as well as a second lien on the collateral as pledged to NDO. This loan is subject to further documentation. The object of the parties is to finalize documentation no later than Monday October 24, 2011 with subsequent funding within two days thereof.

So, what exactly are those “certain assets”? Isn’t Saab out of silverware to pawn? Meanwhile, with bankruptcy such a real possibility, why is a private equity taking a second lien against assets already pledged as collateral to the Swedish government? It’s possible there’s some form of financial logic to that move, but I’m guessing that Mascioli’s passion for automobiles is clouding the judgement here. For more evidence for this theory, see the fact that North Street is paying over four times SWAN’s current stock price for its equity stake. But hey, it’s just $60m, right?

Meanwhile, with more cash to burn while waiting for a Chinese investment that will likely never come, Saabsunited is keeping the fire of enthusiasm alight by promising fans that

Even though many engineers have left the company the spirit is still very high and work has continued, perhaps not in the phase initially thought but still at a high rate on the next generation 9-3. We have heard from several sources that the car should be ready for production within about 14 months, which means it could be either aprox 14 months or even sooner…

One source told us that the car looks really cool, that even the base line model features a lot more than normal and looks incredibly good!

14 months? Saab would be burning an estimated $50m per month in a “nuclear winter” scenario where absolutely no development work is being done. If development on the 9-3 is being done, the burn rate could be $60m per month or higher. Which means the firm is going to have to find one of these North Street-style suckers every month for the next 14 months. And I’m not convinced that there are that many suckers left…