The Vänersborg District Court granted NEVS today another 3 months extension of the reorganisation process. This ruling follows the both assessment of the responses from the creditors and the latest Administrator’s report by the Court. As I explained in an earlier post, this decision means that the Court deems that there are sufficient conditions overall for the reconstruction to continue.
The first signs of the need for a second extension became visible early last month when a letter from Administrator Lars Eric Gustafsson went out to the creditors with claims over SEK 500.000 requesting them to write-down a significant part of their claims while the creditors with smaller claims were promised to be paid in full. Since then several discussions took place, including an information meeting on the factory grounds in Trolhättan on Feb 26th (see details). Only a few days later, the Court decided that based on the postive responses on the composition proposal received, a formal and public composition meeting would be scheduled for March 23rd.
In its ruling today, the Court confirmed to have received already 3/5th of the required votes (both quantity and in monetary value), which is very positive news. NEVS’ Mikael Östlund stated separately that votes in favour by 90% of the creditors and 60% of the monetary value have already been received by the Administrator, making the March 23rd meeting a formality.
Interestingly enough, only four responses were received by the Court in response to the request for reorganistion extension. They were all in favour yet, the main issue for two of them seems to be on the payment terms, which are perceived too long.
Third time the charm?
With this second extension, NEVS now is in its 3rd 3-month reorganisation period (deadline: 29 May). The Court today was somewhat vague in its description as to why they decided to rule in favour. An agreement with the creditors (the ‘composition’) is a prerequisite, but also actual progress on the business side of the reorganisation. That latter part they weren’t specific on and referred to classified information and the weight they are now putting on the opinions of both the Administrator and the members of the Creditors Committee (the Swedish Tax Office was named specifically). In any case, Swedish law allows a 4th period (i.e. maximum 1 year) but both Lars Eric Gustafsson and NEVS CEO Mattias Bergman are adamant that it won’t have to come to that. In fact the scenario that is being painted is that once the composition proposal is accepted by the creditors (and as mentioned this looks like a done deal), NEVS will be able to exit reorganisation by mid-April, to be followed by the final bits in the negotiations with OEM A and B (Mahindra and Dongfeng). Still a lot of “if’s and but’s” (especially around the trademark question) but more and more signs are pointing towards that the third time may indeed be the charm…