Kulula owner sells airport lounge as part of business rescue
Comair sells slow business lounge to FirstRand Bank for R250m
Comair, which operates Kulula.com and British Airways flights in SA, has sold its slow business lounge to FirstRand Bank for R250m to raise the capital it needs to emerge from business rescue.
The airline which had 74 years of unbroken flights and started out as a charter service, went into business rescue in May 2020. It resumed flying in December 2020, while in business rescue.
It stopped all flights again, however, on Monday July 5 due to the longer curfews imposed in response to the adjusted level 4 lockdown, which prohibited nonessential travel in and out of Gauteng, and caused low demand for air travel. The suspension of services left it without the sufficient capital needed to resume travel, putting its business rescue plan under threat.
Kulula flights resumed on September 1.
It announced the transaction publicly on Friday. The company's creditors, however, were alerted of the deal at the end of August and are required to vote to approve the sale on September 21.
In a notice to creditors on its website, Comair said it needed the deal to access funding: “following the pursuit of certain funding initiatives to ensure that the company had sufficient funding to recommence its flight operations on September 1, it has disposed of its slow lounge business failing which, given the severity of the level four lockdown conditions, the company would likely not have emerged from business rescue”.
The deal also includes a R250m loan from FirstRand Bank.
Richard Ferguson, one of Comair’s business rescue practitioners, said in a statement the funding from the deal was a significant step towards the successful conclusion of the business rescue process.
“There is still work to be done, but these capital inflows, the fact that Comair is back in the skies and again earning revenue, coupled with the commitment by the investors to support the viability and sustainability of the business, all point to a positive outcome,” Ferguson said.
Comair has also received R20m from SAA’s business rescue practitioners as part of the R1.1bn settlement of a high court damages award for anticompetitive behaviour. SAA paid an initial amount of R289m in February 2019, but the balance is payable in instalments until July 2022. However, SAA has been in business rescue, delaying its payments to Comair.
The business rescue plan has former Comair board members and executives investing fresh equity of R500m in return for a 99% shareholding.
Discovery Vitality also invested R100m as part of its Vitality reward programme linked to the airline.
Comair delisted from the JSE in April, with jobs cut to 1,800 from 2,200 through voluntary retrenchment and early retirement.
Correction: September 10 2021
An earlier version of this story said Comair was due to delist from the JSE when it had, in fact, already done so in April 2021.
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