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Swedish court rejects Saab creditor-protection plea; Saab will appeal

Thu, 08 Sep 2011

A Swedish court on Thursday rejected an application by ailing carmaker Saab for protection from creditors to give it breathing space to solve a cash crisis and get funds from Chinese investors.

The Vanersborg district court in western Sweden said in a statement on its Web site that there was no reason to believe a new creditor protection process, known as a reconstruction, would work. Saab said in a statement that it is disappointed with the ruling and will appeal the decision.

Saab went through the process in 2009-2010 when it was owned by General Motors Co. Saab owner Swedish Automobile NV said it wanted the court's protection to stop creditors' payment demands from pushing the carmaker into bankruptcy and allow it to work on securing its future.

The company filed for bankruptcy protection on Wednesday through a voluntary reorganization process which would have involved the court appointing an administrator with whom management would have worked to reorganize the company. Saab had said it would present the reorganization plan to creditors within three weeks of filing the reorganization plan.

Chinese funding

Saab has struggled for several months while it seeks funding from an assortment of Chinese and other investors. Production at its Swedish plant has been at an almost continuous standstill since April as suppliers refused to provide parts until they received payment. The company also failed to pay salaries in August.

At a press conference on Wednesday, Saab CEO Victor Muller said that the automaker currently owes 150 million euros ($210 million) to suppliers.

In June, Saab said two Chinese car companies, Pang Da Automobile Trade Co. and Zhejiang Youngman Lotus Automobile, had agreed to take a combined majority stake in the firm for a total of 245 million euros.

The deals are still awaiting approval from the Chinese authorities -- but the collapse in Swedish Automobile's share price this year has seen the value of Saab's listed parent plummet from 66.7 million euros, when the China rescue was announced, to Tuesday's closing market cap of 14.8 million euros.

Chinese authorities have halted planned investments in the past, such as Saab's failed deal with Hawtai Motor Group in May and Sichuan Tengzhong Heavy Industrial machinery's bid for GM's Hummer, which collapsed in 2010.

Swedish business daily Dagens Industri said late on Tuesday that Youngman would not get the necessary Chinese official approval to take part in the deal, citing several sources.

Instead, state-owned Beijing Automotive Industry Holdings Co. (BAIC) or SUV maker Great Wall Motor were seen by Chinese officials as being more suitable partners, the newspaper added.

A source told Reuters in May that Great Wall had been talking with Saab's owner about a possible tie-up.

By Automotive News Europe