14 of 64

** update 10 December 14: 05 CET **
Despite the flurry of (mostly positive) news bits from the past week or so, the Vänersborg District Court still hasn't taken a decision on whether or not the reorganization phase can continue as NEVS requested on December 1st. The decision is expected on Thursday 11 December and the key lies not only in whether the court recons that there is a viable approach forward, but also whether there is an agreement with the creditors. So far, 14 of 64 creditors have confirmed their position to the court and they aren't all positive.

NEVS © 2014 saabblog.net
NEVS © 2014 saabblog.net

Mahindra saves the day
The actual application for extension of the reorganization was filed a week ago on Monday. It more or less reads as a summary of the original reorganization plan (ie with still "Plan A" and "Plan B" as options mentioned), with two main differences. The first and key one that has drawn most media attention already: on Sunday 30 November a Letter Of Intent (LOI) was signed by "a major OEM player" for an upcoming direct investment in NEVS. This OEM -now through one of the suppliers formally confirmed as Mahindra- is to become majority owner and will ensure the completion of NEVS 'business plan and continued in-house car production in Trollhättan. If anything, this confirmation of the signed LOI was the critical missing bit to prevent the court from declining the extension request immediately, so I suppose Mahindra saved the day.

As reported earlier, suppliers were requested by Administrator Lars-Eric Gustafsson to write down up to 50% of their outstanding claims with NEVS. The other difference from December 1st was that contrary to what was written in the letters from the week before, Gustafsson now says that "creditors with a claim below a certain amount are paid in full, and that creditors with claims in excess of such amount receive payment of a certain percentage on the excessed amount ". So more individual suppliers likely to be in agreement, while the ones with the larger claims are the harder nuts to crack, in particular as NEVS essentially says that there is no actual detailed proposal yet (ie no set thresholds or percentages). Either way, trust in NEVS is being severely compromised as promises of "full payments" are now likely being broken.

LeanNova against?
So the creditors are asked to agree just in principle so that the court will approve the prolongation of the reorganization and as soon as they say yes (technically, creditors holding 60% + of the total claim amount have to back it), the actual negotiations can take place.
So far, 14 of the 64 creditors have confirmed their position to the court. While some have specific reservations (eg concerns about the rights to continue to use the SAAB brand name, but also criticism against the requested write down of the claims and the associated perceived violation of trust), they are predominantly positive. Earlier reports also confirmed that the creditors committee consisting of representatives from the Swedish tax office, Leannova Engineering, Orio, Hewlett Packard, Plastal and labor unions IF Metall and Unionen was positive. Interestingly, LeanNova (one of the largest creditors with a claim of over-the-counter XKNXXM) now wrote to the court that they are against the proposed settlement. What are they means are the extension of the reorganization is as such is unlikely.

And Svea Ekonomi really doesn't want to play
On Wednesday morning the news broke that credit, financing and collections company Svea Ekonomi is in fact against a prolonged reorganization under the current conditions. In the letter they sent to the Vänersborg court they state that they have insufficient belief in NEVS 'proposed financing as long as there is no legally binding contract where a new investor (read: Mahindra) is taking over the accountability for running the business.

Decision time Thursday?
The deadline for the creditors to report back to the court was on the 9th and I'm expecting a decision latest by the end of the week as the three judges responsible for the case are convening on Wednesday. The fact that Svea Ekonomi (with claims of around SEK 33M) has now expressed their disapproval means that the court needs to take more time to come to a conclusion.
However, assuming the extension is granted, a great deal of work still needs to be done. If anything, to actually get the letter of Intent turned into a legally binding contract. Supposedly, the Mahindra board will take such a decision by the end of this month but this may need to be sooner ...

15 thoughts on "14 of 64"

  • A general request: In the case of updates, it would be great if they were also made visible in the text ... so I often see "Update ......" in the header but have to look in the text to find where the change is.

    • Thanks for the feedback. I did consider doing this yet as most of the changes were related to the timeline (and the fact that Svea Ekonomi is against a prolongation) it didn't really make sense to have a separate call-out. We rarely update the already published articles anyway and I am expecting the next update to happen in the form of an entirely new post from Tom or myself.

  • Thanks to michasaab and 9-5Aero. There is no better way to comment on the situation! On the subject of Orio AB and (sheet metal) parts: those who can hoard battle vehicles have a clear advantage in the long term ...

    • What perspective ……. 🙁

  • Orio is in charge of spare parts - they are independent from NEVS. Some standard parts come form outside (brakes, dampers ...) and can be delivered without any constraints but some of them are still produced in the current factory.
    If they get bancrupt it is in fact unsure what happens then and if another supplier is willing to produce.

    Not understandable why NEVS speculates with one of their most valuable assets (the current customer base) in this way.

  • No creditor voluntarily waives claims - it is more of a creditor extortion. Creditors can now speculate on whether the loss is smaller via waiver or bankruptcy. Everyone can consider for themselves how credible the NEVS papers are under these conditions. A short time ago it said that all liabilities would be 100% serviced. Now you mess around and don't stand by the given word.

    With such a company I would / will not do any more business - neither as a customer nor as a supplier. Without a functioning local supply chain behind it, even the best products are worthless. The previous SAAB drivers have already had a long odyssey behind them. Whether these drivers of a niche product will ever come back depends not only on the products available, but also to a large extent on trust in the company behind them.

    I also believe that NEVS and a potential bidder in this way again unnecessarily speculate the last trust.

    Whether M + M can do more than produce colored chocolate beans will be seen. At the moment it does not look like more. Here a clear commitment is necessary. Otherwise, let it be. The way you try it now, you will hardly find the necessary market acceptance.

    In addition, I see no reason to make the brand name SAAB available to a bidder who wants to start anew on such a burdened rubble heap.

    • They have summarized everything well and it is indebtat like that.
      Am I just wondering now who will produce the necessary spare parts when NEVS will stop producing?
      Does anyone know who the replacement targets come from that we all need and get?

      • Good question and I would imagine that a possible NEVS bankruptcy will directly threaten the availability of certain spare parts (specifically body parts). As I understand it, Orio is well stocked for the short term but there could be an issue in the mid-term, where finding alternative suppliers probably won't be easy.

      • The company is called Orio AB and has nothing to do with SAAB nor NEVS 🙂

        • The point is that Orio AB (formerly SAAB Parts AB) is currently on sale for spare parts, especially body parts. Should NEVS go bankrupt, Orio wants to find alternative suppliers.
          Another thought is that while they are indeed independent companies, NEVS and Orio AB are obviously important parts of the SAAB ecosystem. In fact, Orio AB recently announced that they will be reducing their workforce by 20% and state as main reasons the declining SAAB installed base and the lack of new SAAB's coming to market.

    • The whole relationship with the suppliers is a very sensitive one. First given the history with SAAB Automobile's bankruptcy (where by the way finally some money will be paid out according to a statement from earlier this week by the administrators), but secondly in terms of how expectations are being handled and met by NEVS. One could argue that Bergman and Gustafsson never should have stated initially that all creditors would be paid in full, only to be followed by this relatively vague demand to write down up to 50% about a month later. This immensely hurts credibility and as keeping a healthy supplier ecosystem is critical for any future success, this was a real miss.
      It remains unclear, it seems unclear, it seems uncontrollable to reduce the debt to a relative risk.

  • The only positive is that when NEVS is not getting the extra 3 months to reorganize; Bankruptcy is inevitable and every supplier wants loose.
    But the situation is very difficult; too much "if's".
    One this is sure; this should really be the last chance

  • If the whole thing is to be done effectively and a buyer wants to resume production in Trollhattan, there is no way around compensating all suppliers / creditors of NEVS in full. The current strategy of NEVS with waiver of creditors is short-sighted and does not give confidence in the future. Mahindra as a buyer should quickly say goodbye to the cost saving / pea counting and either seriously get in or let it. As a supplier, I would think twice if I should supply the successor company again. It suffices if a few suppliers do not want this, and all plans are delayed or gone.

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