Update: According to svd.se, Vladimir Antonov will give a press briefing about the situation tomorrow morning, June 30.
I put this as an update to Rune’s post earlier, but it got so big I figured I’d just give it a new post.
According to Dagens Industri, Antonov will take ownership of GM convertible (lost in translation: redeemable preference?) shares. The value of this is reported to be 2.3 billion SEK (about €248 million), but GM is offering Antonov a substantial discount– between 800 and 900 million SEK (€86-97 million).
Left unexplained is how this affects the Chinese deals. The CEO of Pang Da, Mr. Pang Qinghua said that he was interested in selling some of his shares later from Saab, but that the 50% ownership stake was important to get a controlling share of Swedish Automobile in Chinese hands (together with Youngman). If I’m reading the tea leaves correctly, I’d have assumed he wanted to sell them to Antonov at a later date. Saab needs to be careful in allocating shares with the China deal on the table– we’ve seen them sell cars for cash, property for cash, but they’ve been fairly reluctant to issue shares for cash.
If you recall, GM went in on the Spyker deal with $326 million (€227 million, or maybe the reported “2.3 billion SEK” by DI) in Spyker (now Swedish Automobile) redeemable preference shares (RPS). If GM were looking to get out with as big a chunk of change as possible, selling to Antonov makes a lot of sense. You may also recall that these shares essentially carried with them hardly any voting rights (0.0005%). Here’s an explanation of the RPS from Spyker’s report from last year.
Redeemable Preference shares
At Closing, GM will convert USD 326 million of pre-closing receivables on Saab into RPSs in Saab. The issue of the RPSs will therefore NOT cause any dilution for the shareholders in Spyker. The voting rights attaching to these RPSs constitute 0.0005% of the total voting rights in Saab. The other 99.99% of the voting rights (100% of the ordinary shares) will be held by Spyker. Since the RPSs are capital and not a loan, no interest is due at any time by Saab. The RPSs carry no dividend from Closing until December 31, 2011. A dividend entitlement of 6% starts from January 1, 2012 through June 30, 2014 and increases over time to 12% as from July 1, 2014 until the scheduled redemption date of December 31, 2016. The dividend over 2012 will be added to principal, but as from fiscal year 2013 the dividend is payable in cash. Should Saab have insufficient distributable reserves to pay the cash dividend it will be added to principal increased with a penalty factor of up to 4%, but such that the total dividend entitlement will never exceed 12%.
In the period 2010-2016, the average dividend payable is about 4%, which is considerably below the average interest on a comparable subordinated loan.
The RPSs qualify as equity and therefore, if Saab cannot pay dividends or redeem the RPSs, Saab will not be in default but the RPSs will simply continue to accrue. Also, the RPSs cannot be redeemed as long as the EIB loan is not yet fully repaid. The Saab Business Plan envisages redemption of the RPSs starting in 2016 out of retained profit, without additional funding (from Spyker or anyone else) being required.
So if I’m reading this correctly, it’s an elegant way to get Vladimir in without sacrificing the Chinese deals. The original deal with GM was structured so that he wouldn’t be able to invest in the company until 2016, when GM was out. However if it’s GM that’s selling the shares to Antonov, it accomplishes nearly the same thing. No doubt this is generous of GM, and is ironically fueled by their recent success and turnaround thanks to the current and former US government administrations (hear that, Reinfeldt?).
My personal take on the deal, if it’s true? When Vladimir tried to buy and lease back Saab’s factory, I was in awe of the generous nature of the deal– it meant he could be a part of Saab’s future, but wouldn’t have any formal ownership in the company by name. Somehow, the EIB and Swedish government still got in the way of the deal. Not deterred, he’s back with another €80-90 million to buy 0.0005% of the company. He’s basically paying GM off in this scenario, taking away one of Saab’s largest creditors, and helping out their future cash position. In other words, he’s saving the day in a very big way for Saab if he’s successful– by taking on their debt. Antonov has tried almost every possible way to invest in Saab or help them without acquiring shares in the company at this point. The man has proven himself as a hero to the Swedish automobile industry several times over, I’m a tad confused what it will take beyond this to get government and EIB approval.
This deal also means Vladimir could invest another serious chunk of change for the 14% of the company that Pang Da indicated it would be interested in selling (though the money would go to Pang Da- not sure if there’s a backdoor way for it to more directly benefit Saab). Now, would the Swedish government give a strong and clear statement to the EIB that they’d like this deal to go through right away? Anyone home in Stockholm listening?