Truce reached over SAA rescue plans
• Formal agreement between the government and practitioners puts a new airline on the table
The government and the business rescue practitioners of SAA have reached a formal agreement to discuss proposals that include the establishment of a new airline mooted by public enterprises minister Pravin Gordhan.
They agreed there should be “optimal saving of jobs” in the business rescue process.
The agreement, which marks a truce after weeks of escalating tension over the future of the airline, commits the practitioners to halting any planned asset sales while an alternative plan is under discussion.
According to a memorandum of understanding agreed to this week, the two parties agreed that the department would have until June 30 “to formulate proposals to be included in the business rescue plan.
“During this time there will be no sales of assets nor negotiations in this regard without consultation with and involvement of the department.”
The agreement commits both parties to “actively co-operate in the development of a business rescue plan for SAA. The objective of the business rescue process is to have a restructured, efficient and sustainable airline whether in the form of a restructured airline or a NewCo with no reliance on the fiscus.”
NewCo is the interim name given to a new airline, which Gordhan has suggested be formed while the liabilities of SAA are ring-fenced in an “OldCo” or SAA.
The plan was developed with the assistance of consultancy Seabury, an aviation specialist that has previously worked on turnaround plans for SAA.
Gordhan has complained that the aviation specialist contracted by the practitioners – Alvarez & Marsal – has not delivered value, despite a R35m fee. He has said that he had not seen their work despite requesting to do so.
The agreement follows weeks of escalating tension between the two, brought to a head by Gordhan’s public accusations last week that business rescue practitioners Les Matuson and Siviwe Dongwana have failed to provide a plan while ploughing through the R5.5bn provided for the restructuring. The funding, which was
guaranteed by the government and loaned by banks and was used to fund operations, has been depleted.
SAA, which posted more than R32bn in losses over a decade and was dependent on government bailouts, was placed in business rescue on December 5.
While a business rescue plan should be provided to creditors within 30 days, Matuson and Dongwana have applied for and received several extensions. A plan was imminent shortly before the lockdown was announced by President Cyril Ramaphosa in March.
For their part, Matuson and Dongwana have been dependent on the government for decisions on funding before finalising the plan.
In April, the rescue process was brought to a halt when Gordhan informed them that the government could not provide any further funding.
Matuson and Dongwana then told creditors that only two options remained: a structured wind-down that involved the retrenchment of all workers and an attempt to sell assets, or immediate liquidation.
Gordhan, who has authority over all major decisions under the Public Finance Management Act, said last week that there would be no liquidation and no fire sale of assets.
Louise Brugman, a spokesperson for Matuson and Dongwana, said the co-operation outlined in the memorandum of understanding was not new. The business rescue practitioners “have said from the start that they are available to meet with the department or the minister to discuss the rescue plan”, she said.
From the start, the biggest obstacle to getting a plan on the table has been the lack of funding for a restructured airline. With government finances under far greater pressure now and commercial banks unlikely to change their refusal to fund SAA any further, that has not yet been overcome.