On a wing and a prayer
State offers to pay to keep SAA aloft but business rescuers say show us the money
● The government, at the eleventh hour, committed again to more than R10bn in funding just hours before a creditors’ meeting on Friday. But the airline’s rescue practitioners are reviewing their options in case the money does not arrive.
The joint business rescue practitioners, Siviwe Dongwana and Les Matuson, said on Friday that it “must be clear” they were “not waiting on the funding”. This was why they had presented “two suggestions of a winddown or liquidation” at a creditors’ meeting.
The next update to creditors, on a day not yet announced, will be about which of the two options to pursue “unless the money comes into the bank account before that”, they said.
This is despite the department of public enterprises and the National Treasury committing to money for the airline.
The department of public enterprises said the government would “reprioritise funds” to finalise SAA’s restructuring and the implementation of the business rescue plan. It said details would be announced in the Adjustments Appropriation Bill, to be introduced in parliament soon, and that the airline would not be liquidated.
The Treasury did not respond to requests for comment. The presidency referred Business Times to the department and to the Treasury.
Peter Attard Montalto, head of research at Intellidex, said this “continual game” of the department of public enterprises “making promises that the Treasury has no desire to deliver on” is “ultimately going to damage SA’s credibility, particularly at a time when bond market funding is so challenging”.
There are also “much higher priorities for spending for an economic recovery”, he said. “It is challenging enough as it is and Treasury is having a hard enough time managing expenditure negotiations without now having to suddenly squeeze SAA in.”
When the business rescue plan was approved on July 24, the government said it was committed to mobilising money for the airline’s restructuring. But by Wednesday’s deadline the practitioners had not received any funding and called a creditors’ meeting to review the SAA rescue plan.
At Friday’s creditors’ meeting Dongwana said the business rescue practitioners had held numerous interactions with the government. He said the government had clearly stated that it “remains committed to providing the funding” for the airline.
“Last week we did receive a letter from government indicating that they anticipated the funding would be made available to the company by the 16th of September. Unfortunately, the funding has not yet flowed into the company. Consequently, as a company, we are in a position where we have exhausted the funds within the company and the BRPs [business rescue practitioners] have also exhausted their initiatives to extend the financial runway in order to continue with the operations of the company.”
He said the practitioners believed the two options available include a wind-down of the company or a liquidation.
A wind-down is a more orderly process than a liquidation and potentially places employees in a better position because they can continue to consult in and complete a section 189 retrenchment process as per the Labour Relations Act.
A liquidation, as per the Insolvency Act, only provides for staff receiving a maximum of up to R32,000 each regardless of how long they have worked for the company.
Dongwana told creditors that just before Friday’s meeting the rescue practitioners had received a “further communication from the government with the support of National
Making promises that the Treasury has no desire to deliver on is ultimately going to damage SA’s credibility
Peter Attard Montalto
Head of research at Intellidex, on the ‘continual game’ of the department of public enterprises
Treasury” that indicates “there is a very clear cabinet commitment to provide funding to SAA to the tune of R10.5bn”.
He said the letter from the government also explained that the “mechanisms and timelines are yet to be finalised”.
“It is important that given the fact that we have only received the letter this morning that we engage with government in detail in order to make sure that we have a clearer understanding of the timelines and the mechanisms of how the funds will flow into the company, so that we can then proceed with the implementation of the plan and the restructuring of the company.”
He said the rescue practitioners would be in a position only next week to communicate with affected parties.
The department also said that as “the restructuring process should be brought closer to finalisation in the next few weeks, lending institutions will be requested to finance the restructuring process and honour commitments for voluntary severance packages and retrenchments” at the airline.
Last month Business Times reported that, according to market speculation, major banks which had previously funded SAA had apparently declined to fund the government’s efforts to resuscitate SAA. At the time the banks declined to comment.
Asked to comment on Friday, Absa and Nedbank declined, while Standard Bank, Investec and RMB did not respond to requests sent to them.
Meanwhile, Comair’s business rescue plan was approved on Friday by creditors and shareholders of the airline, which flies Kulula and British Airways domestic flights, opening the way for these to take to the sky from December 1. The plan will see a consortium comprising a number of former Comair board members and executives invest R500m in the company, which will also take on R600m in new debt.
Comair will be delisted from the JSE and will take in a 15% BEE partner. — Additional reporting by Hilary Joffe