Wind down SAA or liquidate — rescuers
SAA’s business rescue practitioners, who have proposed a winding down process that involves retrenching all employees, say they have two choices: either carry on and implement that plan or throw in the towel and apply for liquidation.
A winding down would give employees a better claim on termination pay than a liquidation, but for this to happen employees must provide their consent, which they have not done so far. The company does not have funds to pay salaries beyond April after the government refused to give it more cash.
In a notice to affected parties on Thursday, practitioners Les Matuson and Siviwe Dongwana said if SAA employees do not accept the proposed winding down, they would be unable to continue with the business rescue process and would have to make an urgent application to the courts for an order to discontinue the proceedings and place SAA into liquidation.
“The practitioners do not have sufficient funds available to continue honouring the obligations of SAA employees beyond April 30 2020 and to bear the costs of the wind-down process,” they said.
A draft proposal from the practitioners to unions last week set out the process for the termination of all 4,700 employees at the end of April, with severance packages only to be provided if funds remained at the end of the winding down. The proposal came after government had informed the practitioners that it was unable to provide further funding to the airline, which had received R16.5bn from the fiscus over the past decade while amassing losses of R28bn. It also refused a request to raise funding in foreign capital markets.
But in a separate process, the unions and representatives of non-unionised employees held talks with public enterprises minister Pravin Gordhan in which they discussed working together to establish “a new, financially viable airline”.
SAA entered business rescue, a form of bankruptcy protection aimed at rehabilitating a financially distressed company, in December 2019 after several years of operational losses and government bailouts that had exposed SA’s fiscal constraints. The company is insolvent and its liabilities outweigh its assets.
The practitioners said on Thursday the winding-down process would entail the termination of employment by agreement, with severance packages also being agreed. A sales process would be undertaken which would result in a distribution of the proceeds to affected parties entitled to the proceeds.
This depends on employees endorsing the termination of their employment, which needs mutual consent. An agreement has to be reached by Friday.
“It is the practitioners’ view that the proposed actions outlined above provide the most reasonable way for a managed cessation of the operations of the airline and for managing the risks of all affected parties,” Dongwana and Matuson said.
While a normal business rescue process puts the fate of the company into the hands of independent business rescue practitioners, in this case the Public Finance Management Act, which gives the minister of public enterprises the final say on all major decisions, such as the sale of assets or liquidation, applies.
After meeting with unions this week, the government declared it is not prepared to give up on SAA. Yet it also said it had reiterated during the meeting that it is not in a position to provide more capital to SAA, and that “all parties need to commit to a creative solution” for the airline to avoid a scenario in which the business rescue is deemed to have failed.
The unions were asked to submit their proposals on the restructuring of the ailing stateowned airline and the future of the jobs at stake.