A Swedish local court on Monday granted General Motors' loss-making unit Saab an extension of the period it is protected from creditors, giving it further time to restructure.

The court in Vanersborg, south-west Sweden, approved the extension after hearing that no creditors had entered reservations against Saab's proposed reorganization plan which envisages asking creditors to write off 75 percent of its non-prioritized debts.

The court has decided that the reconstruction can continue until May 20 at the latest, if no other decision is taken before then, the court said.

Saab sought protection from creditors in February in its effort to survive the economic downturn and buy time to find a new owner after its U.S. parent said it would cut ties with the brand by January 1, 2010.

During the reorganization Saab plans to begin negotiations with creditors on writing down the company's non-prioritized debts by about 75 percent, court-appointed administrator Guy Lofalk said in the filing obtained from the court.

A deal on the debt was expected to be concluded in July this year, with a payment to creditors a year later.

A senior tax authority official, representing the Swedish state, as well as a representative of GM, which is also one of the chief creditors to Saab, told the court they supported the plan.

Lofalk said that around 20 potential buyers are looking at the company and that a deal is expected to be completed in June.

So far short descriptions of Saab, so called teasers, have been sent out and comprehensive contacts have been undertaken with different interest parties, he said.

Auto analysts have said creditors were likely to give their approval for the reorganization, preferring it over an outright bankruptcy in the hopes Saab will be able to find a new owner willing to invest enough in the business for it to survive.

RECOVERY

Lofalk said in the filing that a concentration of production and the launch of new models would boost capacity utilization at the company while efficiency measures lowered its breakeven level to an annual production rate of 130,000 vehicles.

Saab also expects a positive cash flow already in 2011 as well as good returns at a production level of 150,000 cars, Lofalk said.

The court document showed Saab expecting to have lower volumes both this year and next compared to the 93,000 units produced in 2008, but that a gradual recovery in auto markets as well as the broader economy would benefit the company.

Saab needs $1 billion of financing to help it overhaul production and launch new models. It aims to raise $600 million of that sum from the European Investment Bank while GM would inject $400 million in the shape of debt write-offs and production equipment, the court filing showed.

The company -- which has been making cars in the industrial town of Trollhatten since 1949 and is one of Sweden's best-known brands -- has said it made a loss of about 3 billion crowns ($370 million) last year and expects a similar loss in 2009.

A global auto market collapse, brought about by the financial crisis and ensuing economic downturn, has plunged the whole sector into crisis, not least Saab's ailing U.S. owner General Motors.

Last month, U.S. President Barack Obama ordered General Motors and its rival Chrysler to accelerate their survival efforts and brace for possible bankruptcy.

Saab, which last month announced it would cut 750 jobs out of a total of about 4,100 in Sweden, has said it is being courted by several potential investors, including both Swedish and Chinese interests.

(Reporting by Sven Nordenstam and Johannes Hellstrom; Writing by Niklas Pollard; Editing by Greg Mahlich and Guy Dresser)

($1=8.114 Swedish crowns)

General motors Sale