STOCKHOLM/AMSTERDAM (Reuters) - The administrator in charge of Saab’s SWAN.AS reorganization asked on Thursday that a Swedish court pull the plug on bankruptcy protection, just hours after an investment firm promised new cash to help keep the struggling carmaker alive.
Saab has struggled for months to fight off bankruptcy and hoped creditor protection would give it time to restructure as it awaits investment from China.
But the iconic, 60-year-old brand will have little chance of survival if the court accepts reconstruction has failed.
Saab administrator Guy Lofalk told Reuters in an interview there was far from enough money to keep the reorganization running. He sent a Swedish court an application asking that it terminate the entire process.
“The money is not enough to continue the reorganization,” he said. “The original reorganization plan included financing which has not materialized.”
The court could end the reorganization and creditor protection process as early as Friday, leaving the field open for creditors — or Saab itself — to demand that the company be declared bankrupt.
Swedish Enforcement Authority official Hans Ryberg said that if the reorganization is ended, the agency will resume its process to seize any remaining Saab assets, to recover debts owed to suppliers.
Saab, which was not available for comment, said in a statement that it would contest Lofalk’s application and ask the court to replace him.
The turn of fortune for the Dutch-owned carmaker came even as an investment firm of racing car enthusiast Alex Mascioli said it would invest $70 million in the carmaker as Chinese bridge financing looked uncertain.
Saab owner Swedish Automobile SWAN.AS said Thursday it would accept a $10 million equity investment and a $60 million loan from North Street Capital LP, a U.S. hedge fund manager, to fund its ongoing reorganization. North Street bought the luxury sports car business of the Dutch owner of Saab in September.
But Lofalk said even that cash was far from enough to keep the reorganization process alive. He said one viable solution was to let Chinese investors buy the whole company.
Chinese auto firms Zhejiang Youngman Lotus Automobile Co and Pangda Automobile Trade Co (601258.SS) have agreed to invest 245 million euros in Saab. Youngman is also behind a bridge loan to Saab that has been partly paid out.
But question marks have dogged the Chinese investments from the start, not least whether authorities in that country would give the go-ahead.
Lofalk said the two firms are keen to buy Saab, but they have failed to reach an agreement with Saab’s current owners.
“I can just say that the parties didn’t manage to reach an agreement on a sale,” he said.
In June, Swedish Automobile signed a non-binding memorandum of understanding for Youngman to take a 29.9 percent stake in Saab and for Pangda (601258.SS) to take 24 percent.
Lofalk said he was told by authorities in China that the companies had the financial muscle to save the carmaker. Chinese authorities, however, have yet to give a green light on the two companies taking ownership in Saab.
The new cash offer comes a day before a state guarantee on wages that kicked in during the company’s reorganization was due to expire, and just before October wages were due to be paid.
Swedish Automobile had hoped Chinese money would keep the lights on, but it expressed doubts on Thursday about whether the bridge funding will be paid in full on October 22, Swedish Automobile said on Thursday.
Swedish Automobile has struggled for months, seeking new investors and selling off various assets in a bid to pay suppliers and employees and resume production at its Saab plant in Sweden. It exited another reconstruction process less than two years ago.
North Street plans to buy 2.38 million Swedish Automobile newly issued shares, representing 10 percent of the Dutch-listed firm’s outstanding shares, at $4.19 each by October 21 to fund Saab’s working capital, Swedish Automobile said.
The shares traded up as much as 17 percent but gave up gains on news of Lofalk’s intentions and ended the day down 10 percent at 0.85 euros, giving it a post-dilution market capitalization of about 23 million euros.
The hedge fund manager will also give a $60 million loan collateralized on certain Saab assets. Documentation is to be finalized by October 24 so that funding is available two days later, it added.
Employees currently have no claims on Saab after the state paid wages as part of the reorganization process. But that wage-insurance guarantee expires this week, so if the reorganization is ended, Saab must come up with wages for the last week of the month on paydays October 25 and 27.
“We’ll have to await the day of payment (of wages) and see what happens,” said Martin Wastfelt, lawyer at blue-collar union Unionen with around 500 members at Saab.
Also, more than 150 suppliers have about 250 million crowns in claims on Saab pending at the debt enforcement authority.
($1 = 0.725 Euros)
Additional reporting by Mia Shanley and Anna Ringstrom in Stockholm and Aaron Gray-Block in Amsterdam; Editing by Helen Massy-Beresford, Gary Hill