Trade unions challenge 100% pay hike for Comair business rescue practitioners

● Outcry as staff battle to receive payment, but two in charge want ‘market-related’ R50,000 day

Unions are up in arms over a proposal by Comair business rescue practitioners (BRPs) to double their fees for restructuring the airline.

The fees paid to BRPs, most recently at retail giant Edcon and state-owned airline SAA, have been in the spotlight.

This also comes amid a surge in companies in distress due to the Covid-19 crisis.

Business rescue is a form of bankruptcy protection that hands over the running of a company to an administrator who seeks to rehabilitate it.

The practitioners, Shaun Collyer and Richard Ferguson, want their hourly rate adjusted to a “market-related” rate of R4,000 each.

Their present earnings of

R2,000 an hour translate to about R25,000 a day including VAT.

Shareholders and creditors are scheduled to vote on the matter today.

The Kulula operator was placed in business rescue at the beginning of May.

It was facing multiple headwinds and headed for its first loss in more than seven decades after swinging R564m into the red in the first half of the year as cost increases outstripped revenue growth.

Its woes, which included the unpaid R790m SAA owes the company as well as an order for Boeing planes that have since been grounded over safety concerns, deepened after President Cyril Ramaphosa ordered a nationwide lockdown that prohibited air travel, as the government moved to curb the spread of the coronavirus.

A Comair spokesperson said the practitioners had proposed that on the adoption of a plan by creditors, they receive their standard improved hourly rates for their professional services.

“The proposed rates are market-related for the specialist skills and expertise the BRPs are providing.

“The conditionality ensures that the interests of Comair, its affected parties and the practitioners are aligned and are all subject to a successful outcome.”

In the event of the plan not being adopted, the BRPs would have provided their services in terms of the outdated tariff and at less than half their standard rate, the spokesperson said.

“As independent professionals, they believe this is a reasonable request and is a material investment in the process alongside the affected parties, including employees.”

National Union of Metalworkers of SA (Numsa) general secretary Irvin Jim said yesterday the union was dismayed by the proposal to hike the hourly rate of the practitioners.

“What is even more shocking is that this request is made while employees at Comair have not been paid their salaries since the end of March.

“The BRPs have delayed the process of the UIF temporary employer/employee relief scheme (Ters) application, and their distribution of payment to employees was highly irregular and resulted in workers being short-paid their salaries for the month of April,” Jim said.

“We accordingly reject this request with the contempt it deserves and we demand that employees at Comair must be paid all their outstanding salaries in full.”

Also at issue is the proposal by the BRPs to conclude a deal with Redford Capital, a corporate financing company in which Collyer and Ferguson are directors.

Should the deal be approved by shareholders, Redford Capital will receive a monthly retainer of R250,000 (including VAT) and a “success” fee calculated at 1% (VAT exclusive) of the gross funding raised for Comair in the course of the company’s business rescue proceedings. Jim said such a transaction would be a clear conflict of interest.

“It is shocking that the BRPs are so brazen in their request that Comair procure directly from a company where they are also directors.”

Collyer and Ferguson have justified the proposed deal with Redford Capital by saying it is the only company willing to assist with the capital raising at a reasonable price.

However, it is understood there are two investors already waiting in the wings who are likely to table non-binding offers soon.

This means the services of Redford Capital will not be required.

In a letter to creditors last week, Collyer and Ferguson say the hourly tariff prescribed for BRPs had not been updated since the publication of the regulations in the Companies Act in 2011, and thus the tariff is “no longer marketrelated for the specialist skills and expertise required of the BRPs for a company of the size and complexity of Comair”.

Some shareholders have questioned why the BRPs are pushing for an increase now, after the tariff structure was agreed on last month.

Trade union Solidarity has also raised concern about the proposal to increase the hourly rate.

“Solidarity has received complaints from its members, who are completely offended and shocked at the attempt by yourselves to increase your fees and, in the process, secure retention of additional services, as well as success fees, while employees continue to experience extreme hardship.

“Your attempts have enraged employees, who are now questioning your independence and your intentions, especially after you have made it clear that the business is in severe distress,” it said in a letter to the business rescue practitioners last week.

The union asked why it was necessary to increase the fees by 100%.

“The current remuneration of practitioners for large companies is limited to R25,000 per day, based on a 12.5-hour day.

“We surmise that you seek to increase this to no less than R50,000 with no indication of a cap.”