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.

Tuesday, April 5, 2011

Saab's expensive EIB loan

DI writes today that Saab is paying a 10 percent interest on the European Investment Bank (EIB) loan. DI also writes that other Scandinavian companies with bad credit ratings, like Scandinavian Airlines and Stora Enso, are paying from 4 to 8.5 percent interest. 

As opposed to the aforementioned companies, Saab's loan is fully guaranteed by the Swedish Government. In other words, the only party that is taking any risk is the Swedish Government, and one can argue that their risk is minimal since the collateral they have in Saab's assets is at least worth twice the amount of the loan.

It is beyond me (and DI) that EIB can charge a 10 percent interest on a risk-free loan. This smells of governmental exploitation of a company in difficulties.

So it's no wonder that Saab and Victor Muller is trying to transfer the EIB loan to a private commercial bank. Doing that, Saab could probably halve the interest and thus save million of euros each year.

An additional "bonus" of getting free from the EIB and the Swedish Government is that Saab do not have to answer to the government each time they want to make changes to the funding of the company.