A brief look at Sweden’s version of business reorganisation

This was posted in comments by CJ and I thought I’d elevate it to be a post for the benefit of those who might be unfamiliar with the process.
The impression that I got from my brief research is that the Swedish business reorganisation act isn’t implemented so much becuase it’s an act that favours the creditors of a business and involves a shipload of supervision that can get in the way of normal operations.
The US version (chapter 11) has an incentive to declare voluntarily and early as it gives the business more control over its destiny.
That said, CJ’s a local so he’s likely to be much more familiar with such things. The scenario he paints seems quite reasonable so I thought it a good idea to share it here to give an idea of what might be on the horizon if Saab were to go that way.
Thanks CJ!
A reorganization is fairly similar to chapter 11. I.e. no more payments are being made to suppliers (and any new contracts / purchases would have better right). A person is assigned to find out if there is a future for the company or parts of it, but it would give some more time to find a possible purchaser.
The Swedish government have effectively said that they where willing to guarantee loans for GM if they made a committment to saab, but GM refused. Instead they wanted the loan guarantee, which would effectively make the swedish government owner after the money was out. Apparently if GM would be the one closing saab they would have closing costs of appr. 8 billion SEK (appr $900M USD). If GM would get the government to take over the company they would be able to get out of this.
The [news] I heard today was that with the current rate saab was burning 500MSEK / month, so then the 5billion loan would be gone by the end of the year. Realistically, the market will stay soft for some time to come so more money is needed, in addition to a stable owner that help return confidence to the market.
The fact that GM will incur large costs for closing the brand (retailers, close the factory not to mention its own reputation and that it wants to be able to sell cars in Sweden in the future) may be what saves Saab.
Its rather clear that GM has been trying to play hardball, and most other governments have agreed to it. This time it did not work, but to get out of the closing costs obligations they may be willing to give a buyer (Chinese i would imagine is the best to hope for as they get a brand, a rather efficient factory, 2 models ready in the pipeline, some development resources and a North American and European sales force).
Strangely enough, it may end up being the Swedish government by putting pressure on GM that gives the new buyer a low entry costs, being better for the brand.

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