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?


39 thoughts on “A Possible Route For Antonov’s Entry – Through GM”

  1. 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..:)?


  2. 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 for the over 4 weeks’ delay for the spare part.
    I wish Saab all the best and hope to buy a new Saab 9-3 at the end of 2012 when the leasing is over.

    • 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.

      • 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.

      • 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…

    • 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?

        • 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 😉

  3. 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.

    • Because they’re preference shares and carry with them penalties down the road if Saab can’t pay them. You’re right, it removes GM from the EIB-Government-GM equation, but I think it benefits Saab in the long run while getting VA in. What I’m wondering is whether or not he could later convert these RPSes into an ownership stake– I assume the board could make that determination later (after a certain period of time).

    • 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 as you said, they don’t carry any voting power so why keep them?

  4. 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.

    • 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 33% a year.
      So invested money will start with 35% interest and end with 68% interest. That indeed is business!

    • +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.

  5. 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?

      • 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)

    • Edited your comment quote to reflect the edit I did in the article RS, hope it’s okay. Trying to have it reflect his statement from ChinaCarTimes as closely as possible.

    • 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 …

  6. 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 and many potential customers would make a purchase knowing their warranties would still be intact.

    Maybe a section on SU about all of SAAB’s individual companies would make a good reference point for many enthusiasts.


    Sorry still not finished.

    It seems a bit ironic that the seemingly bureaucratic nature of GM management has been replaced with an abysmally lethargic real bureaucracy. The best way VA could help SAAB would be to free them for the EIB loan which stands somewhere around €213 Million (plus interest). That’s a far bigger investment than what GM are asking for their RPS but with the EIB out of the way, SAAB can start obtaining loans on far better terms from a whole plethora of new sources.

  7. 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.

    • 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 is needed, and not GM’s, for certain matters, which may (or may not, as the case may be) turn out to be a useful thing for Saab in the long run. For instance, could VA in this circumstance veto Chinese moves to, say, move Saab out of Sweden?

      I can see GM seeing that a choice between (a) selling their shares to VA and (b) selling their shares to China leaves them with (a) as a lesser of two evils from their point of view. Not selling potentially puts them into conflict with everybody for no gain.

      Interesting times!

    • 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! =)

  8. 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 deal doesn`t get production started again – looks like at least two weeks for that to happen – (I got my MY12 9-3 sport wagon just after the the last restart – anyone else in the UK have the same luck?)

      • 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, only 50mpg at the moment, mixed driving, far short of the claimed 60+. The engine is also pretty noisy, I`m being to suspect an exhaust leak, possibly manifold. Other than that I`m well pleased,

  9. 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 line for full price. Sooner or later, GM needed to be gotten rid of anyway.

    But unless Antonov is richer than we know, dumping this amount of money into GM’s coffers means that he doesn’t have enough cash available anymore to lift Saab out of its cash crisis – supposing the EIB finally lets him do so. Seems to me that this cash could have been better used elsewhere. The GM shares are essentially useless, the only value to Saab is that GM doesn’t have them anymore. And that’s a long-term consideration being taken in the middle of a short-term crisis.

  10. 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!!

  11. 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 with the folks who already have that market cornered – and you can’t create demand for future industries by trashing your currently viable ones.

    How stupid

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