NEVS was granted a 3 month extension of the reorganisation process on 2 December of last year. Key at the time was the situation with the creditors as at least two of them were against the continuation. With the March 2nd deadline now approaching fast and NEVS flagging earlier this month that they’ll be needing another extension, the creditor question becomes even more pressing.
Today NEVS announced that they want their creditors to agree to write-off a part of their outstanding claims. Despite this, there are signs that there is light at the end of the tunnel.
In the administrator’s report that Administrator Lars Eric Gustafsson published today, the reduction of the debt is a crucial part and he also sent a letter to all creditors with a request to have them agree and confirm by the March 2nd deadline.
Done in March?
The reorganisation plan as outlined in the administrator’s report is directionally still identical to the previously published plans.
The question around the usage of the SAAB brand however is made pivotal to the explanation as to why another extension of the process is needed. The negotiations with SAAB AB were first done by NEVS but are apparently now taking place directly with the “OEM” (Mahindra) and are reportedly progressing, yet a conclusion is not to be expected before the next couple of weeks. Final due diligence of NEVS by Mahindra will happen as soon as there is agreement on the trademark license, followed by a binding contract by the end of March at the earliest.
The other “OEM” (Dongfeng) is still being worked with as well in the context of a development joint-venture (“Plan B“). Actual development assignments are being worked on and negotiations are ongoing to have Dongfeng fund the actual costs in the coming months.
A third OEM
Finally, “NEVS Industrial Services” (NIS), the contract manufacturing part as described as “Plan B” was formed late last year and NIS went to market in November. Gustafsson states in his report that several potential customers have been found, including a third large OEM with which NIS has entered negotiations about a manufacturing assignment. This process is however been hindered by the fact that NEVS still is in reorganisation.
Light at the end of the tunnel
So despite the negative news for some of the suppliers and the fact that the process is taking more time than planned, there are signs that there is light at the end of the tunnel.
Obviously the agreement around the SAAB trademark licensing needs to be reached, followed by board approval from Mahindra and binding commitment from Dongfeng. Yet, again, the Vänersborg District Court will be critical in whether or not the whole process will be able to continue as they need to decide to grant the 2nd extension and key to that decision will be the arrangements with the creditors.
NEVS’ CEO Mattias Bergman was stating to P4 earlier today that reaching an agreement (“composition” in legal terms or “ackord” in Swedish) with the creditors is a prerequisite for NEVS to be able to apply for termination of the reorganisation phase and for “normal business” to commence again. According to Bergman, then and only then can the negotiations with the two OEM’s be concluded.
NMEH, the parent company to NEVS, has secured funding for the coming 6 months and there are signs that additional significant loans can be obtained through a Chinese state-owned bank.
Speaking about China: the other current share holder in NEVS, the city of Qingbo seems to be showing some signs of interest in the process. After essentially causing the whole insolvency (and thereby the reorganisation) they disappeared from the radar, only to reappear in December through a delegation visit to Trollhättan. Apart from a commitment “to play a more active role in the dialogue with the Chinese authorities”, it doesn’t seem that Qingbo is going to be playing a role with funding any time soon however.
So the composition is key for any further progress to be made. Today’s request (or requirement) to the creditors is backed by the Creditors Committee which is an important signal. NEVS has invited all creditors to a meeting on February 26th, so more news by then.
NEVS’ press release text:
“A composition to get Nevs out of reorganisation
National Electric Vehicle Sweden AB, Nevs, provides unsecured creditors a composition proposal in order to exit the reorganisation. It creates the conditions for completion of ongoing negotiations with two major OEMs and the implementation of a new business plan together with partners and owners. Nevs’ owners and management has noted the difficulty of completing this type of complex negotiations during a reorganisation and the risk premium it implies. The current negotiations, together with two major OEMs, are mainly focused on two tracks that are complementing each other. One is to form a technical joint venture company in Trollhättan and the other is to introduce a new majority owner in Nevs, with the plan of making Saab cars a global premium product.
– The negotiations are progressing but we also see the complication of reaching an agreement when we are in a state of reorganisation. Our main owner has single-handedly financed the reorganisation and intends to get us out of it. In order for this to be possible financially, we need to reach a composition arrangement with the creditors, says Nevs CEO, Mattias Bergman.
The composition proposal includes a composition of 50 percent for unsecured creditors on claims over 500’000 SEK. Meaning that from a total of 573 creditors 469 will get their full claim paid, and 104 creditors will have their claims above 500’000 SEK reduced by 50 percent.
– Provided that Nevs’ composition proposal is accepted, it is my judgment that the prerequisites are favorable to also reach an agreement with a financially strong OEM, and thereby enabling a continued business potential for the creditors. With this said, it is my opinion that accepting the composition proposal is advantageous for the creditors. The alternative of a liquidation would likely result in a lower dividend several years later, says the Administrator, Attorney Lars Eric Gustafsson, Hamilton Law Firm.
All creditors are invited to an information meeting at Nevs in Trollhättan on 26 February.“