9 Sep 2011

Court rejects Saab application

10:14 am on 9 September 2011

An application by Saab for protection from its creditors to help it avoid being pushed into bankruptcy, has been rejected by a court in Sweden.

The Vanersborg district court said it was ''unclear'' how Swedish Automobile (Saab's parent company) ''would be able to solve its liquidity crisis and continue operations.''

Saab had to suspend production in April when suppliers stopped deliveries after not being paid. Employees have also had their pay delayed for three consecutive months.

SA chief executive Victor Muller acknowledged the company owes 150 million euros ($US211 million) to its suppliers.

He had hoped the court would give it breathing space to secure promised investment from China.

The court said it was not clear that if official Chinese approval would be forthcoming and that Saab had provided only very general information about negotiations for other financing options.

Accordingly, the court said there was no reason to believe a new creditor protection process, known as a reconstruction, would work.

Mr Muller says it's not the end of the story, and the carmarker plans to appeal the court's decision.

But Red Spy Automotive managing director Jay Nagley says it's hard to see how Saab will climb back.