IMPORTANT NEWS: National Electric Vehicle Sweden has agreed to buy the assets of Saab Automobile and the sale is expected to be finalized during the summer.

Wednesday, December 14, 2011

The latest deal to save Saab

Swedish newspaper Dagens Industri today writes about the latest deal to save Saab. Accoring to DI, the first part of the deal is to secure EUR 30 - 40 million through payments from Youngman. This money is supposed to be used to pay salaries to the Saab employees and ensure a continued reconstruction.

The next step is for an undisclosed Chinese bank to loan SEK 2 - 3 billion (EUR 230 - 340 million) to Saab. Money probably intended to be used to redeem the loan in the European Investment Bank and pay suppliers so that production of Saab cars in Trollhättan can be restarted.

Chinese Youngman will guarantee the loan in the Chinese bank and will in return get convertible preferred shares in Saab. These are shares that do not give the holder any influence on the company, but which after a predetermined time can be turned into ordinary shares in the common stock. One can imagine that the redemption date can be around 5 years from now, when Saab no longer will depend on General Motors (GM) unique technology.

By giving Youngman only preferred shares without any influence over Saab, the hope is that GM will accept the deal and still supply Saab with technology.

Rachel Pang, CEO of Youngman Automotive and Saab's biggest fan in China?

Youngman will also agree to invest SEK 10 billions the next five years. This investment will be in a joint-venture company and not directly into Saab.

According to TTELA, the plan is to establish a joint-venture company which holds the rights to Saab developed technology and which is responsible for technology development at Saab. This company will be part owned by Youngman and part owned by Saab's parent company Swedish Automobile. Should Saab go bust, this will secure Youngman some value for money invested and the loan it is to guarantee.

The establishment of a joint-venture company will not require any changes in the ownership structure of Saab Automobile and this part of the deal will therefore not need the blessing of GM or the European Investment Bank. The Swedish National Debt Office (NDO) will however need to approve such a deal since the NDO has plegdes in much of Saab's assets. It has been reported that Victor Muller did meet the NDO on Monday, and it is probable that the meeting was in regard to such a deal. The NDO has said that their collateral in Saab's tools and parts companies should be enough to cover the loan in the EIB which the Swedish Government has guaranteed for Saab. And the NDO should therefore be open to allowing a joint-vernture company that holds Saab's development and technology.

In this deal China's National Development and Reform Commission (NDRC) will have to approve the Chinese investments/loans. From earlier we know that two local branches of the Development and Reform Commission approved the intital plan where Youngman and Pang Da would become part owners of Saab. It is uncertain whether the NDRC will approve the deal outlined here or not. But Youngman transferring EUR 3.4 million yesterday is a good sign. And if the promised EUR 30 - 40 million is also transferred quickly (which is a big sum that probably needs clearance by high level Chinese authorities), then we can consider it a very good sign.

So that is the deal according to Swedish news media. We will have to wait and see if this is the final deal that saves Saab.