SA Airways stalls again as rescue practitioners wait for new funding
The directors-general of the department of public enterprises and the Treasury have met with banks to persuade them to provide R5.3bn immediately
The finalisation of the SAA business rescue has again stalled as the rescue practitioners await new funding for the stateowned airline as they are unable to hand back an insolvent entity to management.
The business rescue plan was approved in July and included a commitment from the ministers of public enterprises and the Treasury to “mobilise funding” for the new airline. The rescue practitioners had hoped to wrap up the process this week and hand SAA back to its board and management.
Over the past week, the directors-general of both departments met with commercial banks in an effort to persuade them to provide R5.3bn immediately under the existing Treasury guarantee framework. A further R3.7bn will be required before the new airline is able to start operating.
However, it is believed by people close to the process that the banks, which have previously said Treasury guarantees are not sufficient security to recommence lending to stateowned enterprises, are yet to respond positively to the request. The last bank loans to SAA, made in December 2019 to fund the business rescue process, were enormously difficult to secure. In addition to guarantees, banks insist on a firm repayment date for the loans.
If the government is unable to raise the money, SAA once again faces the threat of liquidation, an outcome the government has said is unacceptable.
While the department of public enterprises says that interest has been expressed from private-sector players to partner with the government in SAA and its subsidiaries, it has not named them. The difficulty for SAA is that it cannot wait for a deal to be completed as the first tranche of R5.3bn is needed urgently. This amount is made up of a payment of R0.9bn to a post-commencement creditor, R2.4bn for voluntary severance packages for staff, and R2bn for working capital.
While the working capital can be delayed as the airline is not yet operating, the repayment of creditors and the retrenchment payments cannot be delayed. The claims of employees that have taken packages will continue to mount as long as they are not paid out, as their unpaid salaries will be added to SAA’s creditor list. Employees were promised by the department of public enterprises that payouts would be made as soon as the business rescue plan was finalised. Finance minister Tito Mboweni has stated unambiguously that the fiscus will not provide additional finance to SAA, other than what is already penciled in to the medium-term budget framework. This includes a repayment of R3.5bn to the Development Bank of Southern Africa, which was made at the end of July; and R2bn in payments to banks, which will now be paid at the end of August.
Commercial banks are also due another R3.8bn from the fiscus during 2020 to repay historic debt accumulated over the years. Last month, public enterprises minister Pravin Gordhan appointed chief commercial officer Phillip Saunders as acting group CEO of SAA in preparation for the return of the business to management.