Swedish Automobile to keep Spyker, convert loans and issue debenture

By Caroline Salls

Pittsburgh, March 5 - Swedish Automobile NV (Swan) gave an update Monday of the steps it has taken to alleviate and improve the serious financial position of Swan and the Spyker business following Saab Automobile's demise.

According to the news release, all of Swan's supervisory board members and one of its two management board members resigned on Jan. 18 because of differing views from chief executive officer Victor Muller on how to deal with the future of Swan and Spyker.

Since that date, actions taken and decisions made have included

• Short-term funding was sought to stave off the imminent threat of a possible bankruptcy by making two drawdowns under a €150 million GEM Equity standby facility. The drawdowns generated €1.5 million in immediate funding;

• The company has decided to terminate talks with prospective buyers for Spyker and to continue the Spyker business as a 100% subsidiary of Swan.

Swan said the sales process with original buyer CPP Manufacturing Ltd. was hampered by legal obstacles primarily caused by the rapidly deteriorating situation at Saab Automobile. Subsequent discussions with other prospective buyers were entered into, but were terminated.

Loan conversion

• An agreement in principle has been reached with Swan's lenders under which the company's convertible loans will be converted into Swan share capital at a price of €0.50 per share.

Specifically, Tenaci will receive 160.4 million class A shares for €64.5 million principal amount and €15.7 million of loan interest; LAT Management NV will receive 64 million class A shares for €30 million principal amount and €2 million interest; and Epcote will receive 45.6 million class A shares for €18.2 million principal amount and €4.6 million of interest.

A total of 270 million class A shares will be issued.

Swan said Muller does not intend to directly or indirectly hold a voting stake of 30% or more in Swan that would obligate him to make a mandatory public bid for all of the company's shares;

• The company's investors will meet on April 17 to vote on an increase in share capital to 500 million shares from 75 million shares to allow for the loan conversion and to vote on a change of Swan's name to Spyker NV;

• Swan has reached agreements with various creditors to further reduce cash requirements. The company said some of these creditors, like GMAC, are directly related to its involvement in Saab Automobile.

In connection with, the acquisition of Saab Automobile, Swan said it granted a $10 million parent company guarantee to Saab Automobile's financier GMAC.

In an agreement reached on March 2, that exposure has been reduced to $1 million to be placed in escrow for the duration of GMAC's recovery process, which may take up to several years.

Additional creditor agreements are expected to be reached shortly;

• Spyker has reached an agreement with CPP (Manufacturing) Ltd., which is in administration. Under the agreement, Spyker will buy tools, work in progress and parts for its Spyker C8 Aileron production; and

Convertible debenture

• Swan has reached agreement in principle to issue a €10 million convertible debenture to GEM of New York to finance its short-term funding.

An initial €1 million convertible debenture will be issued, followed by four additional convertible debentures. The issuance of each of the further debentures is contingent on the volume-weighted average price (VWAP) of Swan's listed shares exceeding the initial fixed conversion price for each day during any 30 consecutive trading days.

Each debenture is convertible into class A shares at the option of the holder, and will be convertible at the lesser of €0.30 or the VWAP for five trading days before closing of the first tranche and 100% of the average of the three lowest VWAP prices in the 40 consecutive trading days immediately preceding conversion. For each of tranches two through five, the fixed conversion price is 135% of the previous fixed conversion price.

A coupon of 1% will be payable in cash or shares at the time of conversion. The securities carry a term of five years, during which Swan cannot issue other convertible securities with similar terms.

At maturity, all outstanding debentures will be converted into shares. Swan is entitled to redeem the debentures at any time at 135% of their par value plus accrued dividends.

Swan said it will grant warrants to GEM for 20 million shares at a price per share of €0.50. The warrants will be exercisable at any time during a four-year period after they are granted.

Swan said it is in discussions with various parties to fulfill its medium-term and long-term financing requirements to expand the Spyker business, including the production of the SSUV Spyker D8 Peking-to-Paris.

Spyker focus

"There can be no doubt that 2011 was the worst year in Swan's history," Muller said in the release.

"In spite of all our efforts, Swan could not prevent Saab Automobile's bankruptcy, which left both Swan and Spyker in a very serious financial position.

"With agreements in principle to convert the Tenaci, LAT and Epcote loans and various agreements with creditors as described above and the GEM convertible in place, Swan is determined to fully focus on growing the Spyker business again."

Swedish Automobile is based in Zeewolde, the Netherlands.

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