Fly Modern Ark and Cerberus Capital Management have made an unsolicited offer of R21bn for a 51% stake in the state-owned airline, City Press reported on Sunday. Picture: BUSINESS DAY
Fly Modern Ark and Cerberus Capital Management have made an unsolicited offer of R21bn for a 51% stake in the state-owned airline, City Press reported on Sunday. Picture: BUSINESS DAY

A report on Sunday of a R21bn offer for a 51% stake in South African Airways (SAA) has been greeted with disbelief and scepticism by the DA, among others.

According to City Press, Fly Modern Ark — which describes itself on its website as a 100% South African black owned aircraft leasing company — has offered to buy a controlling stake of state-owned enterprise SAA for R21bn with the backing of US private equity firm Cerberus Capital Management.

New York-based Cerberus describes itself as specialising in “distressed investing”.

“SAA initially expressed an interest in the idea but later went quiet,” Fly Modern Ark co-founder Theunis Crous told City Press.

The DA responded to the City Press story with a media release urging finance minister Tito Mboweni “to carefully consider” the offer, but listed several caveats.

The DA interpreted the offer as a loan rather than a partial privatisation.

“The proposed loans of R21bn to SAA from the consortium must not be backed by any government guarantees, and it must be used primarily to extinguish all existing loans to SAA that are backed by government guarantees,” the DA said. 

Another condition the DA suggested was that the deal should be tied to all existing taxpayer guarantees of R19.1bn to SAA and no further guarantees must be issued.

“The R21bn offer may be too good to be true and, in the end, the only solution will be to put SAA into business rescue,” the DA said.

“SAA is bankrupt and is only able to continue trading as a result of lenders having allegedly at the eleventh hour, provided short-term funding of an additional R3.5bn until the end of March. This will bring the SAA loans, repayable by the end of March 2019, to a massive R13bn.”

According to the DA, Mboweni's recent move to provide SAA with an additional R3.5bn seemed “at best to be underhanded but possibly illegal”.

“The basis on which lenders have made an additional R3.5bn available to SAA will presumably have been on the basis of yet another ‘letter of commitment’ from Tito Mboweni/National Treasury, that commits the government and the taxpayer, to a further cash bailout in the 2019 budget. This means that R3.5bn has effectively been paid to SAA from the 2019 budget before parliament has approved this budget,” the DA said in Sunday's media release.

“Unless robust action is taken to put SAA into business rescue or an equity partner with deep pockets is found, the massive taxpayer bailouts of SAA will continue unabated.”

laingr@businesslive.co.za