A Possible Route For Antonov’s Entry – Through GM

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?

 

Tripod
Member
5 years 3 months ago

The Update/Jeff’s post:

Thud *me falling over*

Daniel B
Member
5 years 3 months ago

Well now… This is going to be interesting. If Vladimir is putting the money on the table for the new price tag, who will the Swedish Government blame? Manybe it will be us the Saab Enthusiasts… Our belowed site SU cannot be a good thing for the Governments prospects of winning the next election right..:)?

/D

Jarkko
Member
5 years 3 months ago
I have been waiting for a new diesel particle filter for a month now – my 9-3 TID Wagon of 11/2008 is stranded at the local Saab dealer in Helsinki. The dealer suspects that the reason for the long delivery is Saab’s financial problems but who knows. I am driving a substitute car paid by the leasing company – so this delay is costing them a lot of money. As the Saab dealer’s contact is a former colleague from our previous job I think I am well attended to- but they just don’t have the part nor know the reason… Read more »
Red J
Member
5 years 3 months ago

To be honest, the leasing company is acting in a very awkward way. They could mount a after-market filter, while waiting for the original spare.

On the other side, my father had to wait 4 months to get a new AC-compressor for his VW, and nobody was telling him why. And believe me, where he lives he needs the AC to work.

So this may be linked to the Saab crisis, but due to Japan many automotive suppliers are also having problems.

Motoradd's Cat
Member
5 years 3 months ago

Most AC components are made in Japan. So the delay is most likely the aftermath of the Tsunami.

I think the main manufacturer is Nippon Denso.

On the other hand, in 2001, I had to wait 3 months for an AC condensor for my 900V6. So delays with AC components are not new.

whoozy2002
Guest
5 years 3 months ago

after market filter voids the warranty? i thought the Saab parts business was the most profitable so why are they not producing/buying parts? availability of parts is essential to retain current customers, information and transparency remains vague and not the way to save let alone build a business…

KarlR
Member
5 years 3 months ago

Thats a bit scary! Can someone from SU call the SAAB Sparepart company and ask how there situation are with parts?

Romac
Member
5 years 3 months ago

I had to wait over a month for an intercooler ‘radiator’, then another week for a steering rack after an accident – got the car back last week. As it was an insurance job, they wouldn’t contemplate non-official parts [ especially a hi-flow intercooler 😉 ].

There was a suggestion a while ago on SU that Saab spares stock had been raided to get production running again in May. Any truth?

phermansson
Member
5 years 3 months ago

No, no truth in that… there is a general lack of spare parts for most car makers all over europe right now.

Tim
Member
5 years 3 months ago

You’re right. While waiting for my new Saab I temporary have got a Seat. A few weeks ago the engine had a turbo failure and they couldn’t get any spare parts so I ended up with an other temporary car 😉

GerritN
Member
5 years 3 months ago

I don’t get it. Why would Saab want to get rid of GM as a share holder? The shares that GM is holding are basically a discount on the sales price and don’t carry much voting power. Probably GM doesn’t even care if they still carry any value, they have written off that money already.
The only reason for Antonov to take over those shares is to just get rid of a GM that doesn’t want to be affiliated with Antonov in any way.

KarlR
Member
5 years 3 months ago

Because EIB needs GMs approval of everything and GM will only say yes to SAAB and EIB if someone buys them out!

Christofer
Member
5 years 3 months ago
I don’t think it is so much saab that wants to get rid of GM as much as GM wants to get rid of SAAB, I am guessing GM sees an oppertunity to get money for their shares now and if saab goes bust they have at least gotten some money back. From GMs perspective there is no point in keeping the shares if someone wants to buy them. If SAAB goes bust they will loose those shares anyway. if SAAB lives on they will still purchase parts from GM so GM will still make money out of SAAB and… Read more »
Coke is it
Member
5 years 3 months ago

If Antonov buys the part that GM has in Saab that money would go to GM. Saab will not get any money at all. Antonov must invest another billion kr to secure the start up of the factory.

This makes no sense at all.

I think DI has once more either listened to a rumor from a chines cab driver or maybe they made this up all by themselves.

requist
Member
5 years 3 months ago
Exactly my thought, this won’t give VA any official influence on Saab, does not get Saab any money so would only be a risky loan with a very high profit. It might be true but then it does not help Saab. If VA could buy these RPS’s for 90milion and Saab survives, his return investment would be huge. If you only look at the difference between buy and eventually sell of the loan it will give 275% in 5 years, but from 2013 interest rate will be 12% of 248mil euro, or 30mil a year. That would be a staggering… Read more »
BoeBoe
Member
5 years 3 months ago

+1

If Antonov buys these shares the money will go to GM and not to Saab.
Saab has to pay interest to Antonov instead of GM

Antonov is a smart businessmen and this is an excelent opportunity for him to make an easy buck.

RS
Member
5 years 3 months ago

The CEO of Pang Da, Mr. Pang Qinghua said that he was interested in selling some of his shares later from Saab

Doesn’t this bother anyone? Is it now the Chinese Gov that decides who can own Swedish Automobile? This is not acceptable IMO.
So we have Communist China and Social-Democratic Sweden, including EU (EIB) and GM (Government Motors) pulling all the strings. What’s next? Approvals from Putin and Obama.
I’m not joking.

What happened to Independent SAAB and free entrepreneurship?

bengtp
Member
5 years 3 months ago

Social-Democratic Sweden???? Not since 2006 at least.

RS
Member
5 years 3 months ago

Sorry, couldn’t come up with a better phrasing for a country that applies this interesting mix of policies on a public company outside Sweden.
If you’d ask me what is European Union I couldn’t tell you. Democracy? Bank Cartel?

Jeff I’d still like to have the ”Chinese authorities demand” mentioned in the quote somehow 😉 (never mind)

Carlo A
Member
5 years 3 months ago

I guess any changes that affect owenership must be approved by all stakeholders that have a vested interest in acquiring a stake in SAAB…. so also the chinese …

BoeBoe
Member
5 years 3 months ago

Why? if you want to sell shares you can sell shares. Especially when the EIB left.

WooDz
Member
5 years 3 months ago
I recently asked my local dealer what the score was with parts orders and they told me that this is unaffected by the recent cash flow problems. I know that SAAB is split into many factions, just incase things don’t work out for the company as a whole and various profitable entities can be salvaged. I think it would be good to know (if this is indeed true) that SAAB would still have a parts dept. well into the next decade regardless of whether the main plan was producing vehicles or not. I believe this is a big deciding factor… Read more »
nils
Member
5 years 3 months ago

If VA has sufficient funds, the way out should be to buy out GM and to cash out the EIB loan to get rid of all the attached strings. Then he needs to fully fund Saab until 2014, when he could sell the company at a profit.

However, one can wonder why this did not happen before, e.g. in February or March, as it would have been much cheaper with less damage to the brand.

skwdenyer
Member
5 years 3 months ago
As I’ve said before, however interesting VA is, he doesn’t seem to have $1bn or so kicking around in cash or liquid assets. He is a useful ally, and has a history of getting things done, but he doesn’t have a limitless supply of money! As others have said, the downside to this deal is money -> GM and not -> Saab, and still no collateral in return for his money (as would have been the case with the property deal, which was at a much more favourable price to Saab IIRC). But it does make sure that VA’s approval… Read more »
michaelb
Member
5 years 3 months ago

+1

Lars S
Member
5 years 3 months ago

The real estate deal is now beeing looked at by the NDO.
http://ttela.se/ekonomi/saab/1.1269799-fastighetsforsaljningen-inne-pa-riksgalden

phermansson
Member
5 years 3 months ago

Hi Lars, please in the future, send all links and tips to our crew mail so that we can make a big post about it. That way it gets more attention! =)

TonymacUK
Member
5 years 3 months ago
So the NDO is looking at the property deal but don`t know when they will reach a decision. Back to square one, then, with the NDO needing to pull their finger out and the EIB asleep somewhere in the background (strange they keep harping on about corruption when they dish out loans to countries whose governments are not noted for honesty, and are also part of an organisation whose accounts have never been passed by the auditors! And as for the Swedish government – I thought we Brits had had our fair share of twerps, but this lot!!!!!!!! This VA… Read more »
michaelb
Member
5 years 3 months ago

Lucky guy. What are your first impressions about your new car?

TonymacUK
Member
5 years 3 months ago
For the previous 2 months I had a MY11 car on loan from SAAB GB, My new car is the same, but with previous options now fitted as standard, (which you probably know), at a new competitive price. I also had power seats and SatNav (which is very pricey, but was dealer discounted) and Parchment leather. In retrospect, I wish I`d gone for the leather upgrade and not bothered with the SatNav. Steering, brakes and roadholding better than my previous 2006 Honda Accord. Performance is good and will get better as the engine loosens up, as hopefully will the economy,… Read more »
tobbe
Member
5 years 3 months ago
Börjesson
Member
5 years 3 months ago
Maybe I’m being simplistic here, but it seems to me the reasoning behind this deal is simply that GM thinks Saab is likely to go bust, in which case their shares will be worthless. So they’re quickly selling them at a discount, to salvage at least something of their value. What I don’t quite understand is Antonov’s reason for buying. Or, all right, there’s the obvious angle: He doesn’t think Saab will go bust, so this is an opportunity to get rid of GM at a cheaper price, instead of having to do it a year or two down the… Read more »
Red J
Member
5 years 3 months ago

Börjesson,
I don’t know if you have noticed it, but every time Saab wants to do something to get some relief of the current financial pressure, EIB, GM and the Swedish government have to approve it.
So, getting rid of any of those three can only be good for Saab.

TonymacUK
Member
5 years 3 months ago

All three would be better

Red J
Member
5 years 3 months ago

Pressure on the Swedgov is rising 😉 (2 out of 3)

zippy
Member
5 years 3 months ago

RedJ, could you guys head round to wherever it is Reinfelt like and give him a good kick up the backside. Either that of give TimR the ‘keys’ to a JAS39 so he can do a series of flypasts with full afterburner over the parliament buildings in Stockholm.

The Swedish PM needs to realize we Saab owners want answers as do the lovely people of Trollhattan.

Saab Up!!

skn
Member
5 years 3 months ago
This crap is making Sweden look positively medieval. Not the image that the folks in power want. If Sweden is perceived as anti-industry, and countries like the US are rediscovering that they need to manufacture or simply sink into debt-riddled poverty buying crap from everyone else, getting loans from the same people to buy the crap – well, thats where Sweden is headed unless these bozos get their heads out of their own asses So sad for an economy known for “INDUSTRIAL DESIGN” and “FORM FOLLOWS FUNCTION” – you can’t do that with services, and you can’t compete on services… Read more »
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