As the day in question is tomorrow and there are still a few headlines going around about this, I thought it wise to bring it back to the top of the page.
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Despite the sound of the headline, this is not a press release.
The purpose of this posting is two-fold: to talk of the delay in the submission to creditors that was planned for November 22, and to clarify what was going to happen on that date.
As has been mentioned in the media already, Saab/Swan and Guy Lofalk have taken a decision to delay submitting their composition proposal to creditors. According to the time plan mentioned at the Creditors Meeting on October 31, this proposal was due to be submitted on November 22. As with much of what’s happening as part of this process, however, that date on that October plan was a preliminary date, and subject to change depending on the prevailing circumstances.
Right now, the prevailing circumstances include ongoing negotiations with our partners and stakeholders. We submitted a purchase proposal to General Motors, which they rejected. We are now negotiating a proposal with a view to getting an outcome that will be acceptable to all parties and it was held that the November 22 submission should be delayed in order to facilitate those ongoing negotiations.
There’s been a fair bit of anxiety over the November 22 date and what it might entail for Saab. It has been described in some reports as another Creditors Meeting, which implies a decision point in the process. This is not actually the case.
What was actually due to happen was the submission of what is referred to as a composition proposal. This is a proposal sent to creditors by Saab for their consideration, one that specifies how Saab intends to pay back outstanding debts, as well as a proposal on future payment and delivery terms. Our creditors and suppliers have been notified about this delay by Saab’s purchasing department as part of our ongoing conversation with stakeholders.
There is no replacement date for November 22 at this stage, but obviously everyone concerned would like to get this process moving as soon as possible. We also have to get it right, however, and the first crucial step in getting it done right is to get a purchase proposal together that all parties can approve, which is what we’re working on right now.
There might be some uncertainty as to what that will mean for Saab today. In short, whilst the MoU does indeed expire, all parties to that deal have agreed to continue talks.
General Motors, who must approve any sale of Saab under certain conditions, indicated that they would not accept a sale of Saab Automobile as per the terms of the MoU. Therefore the parties involved are negotiating to determine conditions that GM will accept.
As has been previously reported in the media, information has been sent to GM outlining Saab’s proposed business plan and intentions for the future, as background information for any further change-of-ownership proposals put before them.
It’s the beginning of what will surely be another big week in the history of Saab Automobile. I think I can speak for colleagues here at Saab and say that we’ve seen some wonderful things in the last few weeks – the support and happiness of people attending the dealer tours, as well as the recent and spontaneous gestures of support on several other fronts as well. We truly appreciate it.
I just wanted to quickly refer back to something that I wrote last week in a post called Waiting.
There’s no reason why Saab Automobile has to succumb to the circumstances that have plagued it this year. As I mentioned a few days ago, Ford managed to get a similar deal done to give Volvo a future. I think it can be done here, too. We still have a lot of very good reasons to be here in this industry. If there is goodwill in the room, there will be a way to work this out with an agreement that will work for all concerned.
I’d now like to invite you to read the Editor-in-Chief of one of the most important newspapers in the automotive industry, Keith Crain from Automotive News:
….GM should look at how Ford handled the situation when it sold its Swedish company, Volvo. That seemed like a very civilized transfer, and Ford acted gentlemanly the whole time. That might be something GM should study.
I’m not playing favorites. But if Saab is to die, it should happen in the marketplace, not in some corporate boardroom without even a fair hearing.
We have no plans that include dying. We just want to bring our new vehicles to market and knock a few people’s socks off.
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This week, Saab will have to try to extend its MoU with Chinese partners Youngman and Pang Da, as well as continuing negotiations with General Motors about what will constitute an acceptable deal in their eyes.
There is an important deadline looming with regard to our reconstruction procedure (on the 22nd), so time is precious.
As written above, I hope there is plenty of goodwill in the room. There has to be a way to work this out.
I know we have some shareholders in SWAN and other interested parties who visit here, so this is important information for them. It’s also interesting for those business-watchers following developments with regards to the sale of Saab.
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Zeewolde, The Netherlands, 11 November 2011 – Swedish Automobile N.V. (Swan) provides further information regarding the sale of the Saab Auto Group and the Spyker business, including the further consequences for Swan.
1. Sale of the Saab Auto Group
On 28 October 2011, Swan entered into a memorandum of understanding (the MOU) with Zhejiang Youngman Lotus Automobile Co., Ltd. (Youngman) and Pang Da Automobile Trade Co., Ltd. (Pang Da) for the sale by Swan to Youngman and Pang Da of the shares that Swan holds in Saab Automobile AB (Saab Automobile) and Saab Great Britain Limited (Saab GB) for an aggregate purchase price of EUR 100 million. In terms of the MOU, the total purchase price of EUR 100 million will be paid in the following manner:
EUR 50 million upon completion of the sale
4 instalments of EUR 12.5 million payable on the first, second, third and fourth anniversary of completion of the sale
Final agreement between the parties is subject to a definitive share purchase agreement (SPA) between Swan, Pang Da and Youngman, which will contain certain conditions. Amongst others, these conditions will include approval of the transaction by the Swedish Government represented by the Swedish National Debt Office (NDO), the European Investment Bank (EIB), General Motors (GM), the National Development and Reform Committee of the People’s Republic of China (NDRC), the shareholders of Swan and several other organisations.
The agreement in principle is that any outstanding intragroup loans and other financial obligations between Swan, on one hand, and Saab Automobile, its subsidiaries and Saab GB (together Saab Auto Group), on the other, will be set off or written off in accordance with applicable law without any actual payment being due and payable. The draft SPA will also be based on the principle that Swan is to be discharged of all Saab-related obligations.
The MOU is valid until November 15, 2011; its validity is also contingent on Saab Automobile remaining in reorganisation. The parties are currently in discussion about the SPA. GM publicly indicated on 7 November last that it will not agree to the continuation of the existing technology licenses or the continued supply of 9-4X vehicles to Saab Automobile following the proposed change in ownership of the Saab Auto Group. Swan and Saab Automobile are currently in discussion with GM. Without the GM consent having first been obtained, it is uncertain whether the parties are in the position to sign an SPA before 15 November of this year.
An important consideration for Swan to enter into the transaction is the commitment of Pang Da and Youngman to provide long term funding to the Saab Auto Group. With Youngman and Pang Da as new partners, the basis for a successful re-start of the Saab Auto Group would be established.
Pang Da and Youngman have assured Swan that their investment in the Saab Auto Group is driven by a business rationale that includes a long-term strategy for the group.
2. Sale of the Spyker business
Swan announced on 29 September 2011 that it had reached conditional agreement with North Street Capital, LP (North Street), a US based private equity firm, to sell to North Street the Spyker sportscar business for a purchase price of approximately EUR 32 million.
Swan is currently in discussions with North Street about the sale of the Spyker business and definitive transaction documentation.
3. Consequences for Swan of the sale of Saab Auto Group and Spyker business
3.1 Use of sale proceeds
If Swan sells the Saab Auto Group and the Spyker business as currently envisaged, the total (net cash) proceeds will amount to EUR 132 million. The exact use of these proceeds depends on the negotiations with the different stakeholders of Swan (i.e. creditors, lenders, etc.). Based on the current situation, the proceeds of the sales will not allow Swan to meet all its liabilities in full. The management of Swan will use its reasonable endeavours to come to a settlement that is acceptable to all its stakeholders, in line with applicable law.
3.2 Future of Swan
The future of Swan will depend on the outcome of the negotiations with the purchasers of the Saab Auto Group (Pang Da and Youngman) and the Spyker business (North Street).
If Swan is not able to complete a sale of the Saab Auto Group or secure further financing for the Saab Auto Group, management will likely not be able to safeguard the continuity of the Saab Auto Group, which will have negative financial implications for Swan and its stakeholders and may result in the bankruptcy of the Saab Group.
If Swan is not able to complete a sale of the Spyker business, Swan may continue the Spyker business, provided that the necessary funding for that business can be obtained.
If Swan were to sell the Saab Group but continues the activities of the Spyker business, as it did before it acquired the Saab Auto Group at the beginning of 2010, it will focus exclusively on the Spyker business.
If both businesses are sold, Swan will consider all of its options (including a voluntary liquidation of Swan).
The fact that the required approvals are not yet secured and that there are currently not yet final binding agreements in place with the purchasers of the Saab Auto Group and the Spyker business leads to uncertainty with respect to the completion of the various transactions described above and thus the future of Swan and any settlement with stakeholders.
Below a best estimate overview of the liabilities of Swan per 31 December 2011 (unaudited):
Most important creditors (amounts in million EUR):
As you may have read in news reports earlier today, discussions are ongoing with our Chinese partners as we try to negotiate a solution that will satisfy all parties.
China’s Zhejiang Youngman Lotus Automobile Co said it still wanted to invest in ailing car maker Saab after General Motors said on Monday it would stop supplying components and technology if Pang Da Automobile and Youngman succeeded with their acquisition bid.
Youngman director Rachel Pang said on Wednesday the company will do “everything they can” to support Saab’s survival. She told Swedish news agency TT Youngman still wants to buy Saab.
“Of course we do. If you are afraid you cannot succeed in business. There are always difficulties. One has to find solutions, not just give up,” she was quoted by TT as saying.
Saab Automobile AB said Wednesday that it is discussing a new ownership structure with its Chinese investors, trying to save plans of selling the cash-starved company after former owner General Motors Co. objected to the deal.
“The purpose of these discussions is to find an ownership structure that everyone can agree on,” said Saab Automobile spokesperson Gunilla Gustavs, noting that the proposed 100% Chinese ownership “was an issue for GM.” Ms. Gustavs didn’t provide further details of the discussions.
From an internal point of view here at Saab, we continue to pursue all of our current objectives, which include but aren’t limited to these discussions.
Since GM’s statement on Monday night, we continue to work with Youngman and Pang Da to prepare to respond to GM’s questions on the proposed sale transaction of Saab Automobile AB to Pang Da and Youngman.
The Saab management team is preparing an in-depth communication package that clarifies the new business plan and the intentions for the future. The purpose is to present this to GM and clarify the intentions with the operations in China, thus seeking GM’s consent for the transaction through discussion and negotiations.
In parallel, the other processes continue, both those regarding approvals and those referring to the reorganization. Project Cheetah goes on as well, with the aim to create a new cost structure for Saab next year.
We had a setback, but in the Saab tradition, we keep moving on toward the goal. If our recent dealer tours through Germany and Austria are anything to go by, then the product and the customers demand it.
Zeewolde, The Netherlands, 28 October 2011 – Swedish Automobile N.V. (Swan) announces that it entered into a memorandum of understanding with Pang Da and Youngman for the sale and purchase of 100% of the shares of Saab Automobile AB (Saab Automobile) and Saab Great Britain Ltd. (Saab GB) for a consideration of EUR 100 million.
Final agreement between the parties is subject to a definitive share purchase agreement between Swan, Pang Da and Youngman, which will contain certain conditions including the approval of the relevant authorities, Swan’s shareholders and certain other parties. The consideration of EUR 100 million will be paid in instalments. An important consideration for Swan to enter into the transaction is the commitment of Pang Da and Youngman to provide long term funding to Saab Automobile.
The administrator in Saab Automobile’s voluntary reorganisation, Mr. Guy Lofalk, has withdrawn his application to exit reorganisation. The MOU is valid until November 15 of this year, provided Saab Automobile stays in reorganisation.
Trollhättan, Sweden: Today, Swedish Automobile N.V. (Swan) announced that it has given notice of termination with immediate effect of the Subscription Agreement of July, 2011 entered into by Swan, Pang Da and Youngman.
Swan took this step in view of the fact that Pang Da and Youngman failed to confirm their commitment to the Subscription Agreement and the transactions on the agreed terms contemplated thereby as well as to explicit and binding agreements made on October 13, 2011 related to providing bridge funding to Saab Automobile AB (Saab Automobile) while in reorganization under Swedish law.
Pang Da and Youngman have presented Swan on October 19 and 22 with certain conditional offers for an alternative transaction for the purchase of 100 percent of the shares in Saab Automobile which are unacceptable to Swan. However, discussions between the parties are ongoing.
Zeewolde, The Netherlands, 21 October 2011 – Swedish Automobile N.V. (Swan) confirms that a new offer, constituting a direct purchase of the shares of Saab Automobile AB and Saab Great Britain Ltd, was made by Pang Da and Youngman. The parties made the offer during discussions with Swan, referring to changed circumstances since July 2011 when the subscription agreement was signed. Swan declined this offer. Swan has requested confirmation from Pang Da and Youngman that they are able and willing to consummate the agreements that are signed. That confirmation has not been received to date. Further discussions are ongoing.
Yesterday the administrator filed an application to terminate the voluntary reorganization process with the District Court in Vänersborg, Sweden. The regular procedure prescribes a hearing of the arguments of both the administrator and Saab Automobile. Saab Automobile has until 27 October 2011 to reply. The court has informed Saab Automobile that it shall decide on this case on 28 October 2011.
The current developments do not influence the validity of the offer of North Street Capital LP as communicated yesterday.
In view of all developments Swan has decided to publish its Q3, 2011 results on 30 November 2011 instead of 28 October 2011.
Trollhättan, Sweden: Swedish Automobile N.V. (Swan) announces it has received a commitment from North Street Capital, LP (North Street) on the funding of Swan and Saab Automobile AB (Saab Automobile).
The offer consists of the following transactions:
Subscription to 2,386,635 ordinary shares in the capital of Swan at a price of USD 4.19 per share for the purpose of funding the working capital of Swan, Saab Automobile and Saab Great Britain Ltd. The shares to be issued will be paid in full by Friday October 21, 2011.
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.
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.
Many have highlighted October 14 as a possible date when the NDRC would take its decision regarding Saab’s planned business agreements with Pang Da and Youngman. For third parties it is not possible to know exactly when authorities like the NDRC will take their decisions.
The reason for October 14 spreading the way it has, is an early assumption made by Saab in court documents, based on general process information that Pang Da and Youngman received from the NDRC. The fact that we didn’t receive any decision from the NDRC today has no bearing on the decision process in its entirety and is not something from which we should draw any conclusions.
Pang Da and Youngman are very committed to making our partnership a success as proven by yesterday’s announcement regarding the first payments under our bridge financing agreement with Youngman.
In other words, Keep Calm and Carry On. We can’t control the timing of the NDRC process, we can only make best estimates of when their decision will come, which is what we did in our court documents.
