There is a reasonable prospect of the successful business rescue of SAA despite the inevitable risks and challenges involved, the airline’s joint business rescue practitioners told creditors at the first creditors’ meeting on Friday.

The practitioners Les Matuson and Siviwe Dongwana provided creditors with an overview of the past 10 days and the actions taken, with the meeting also offering a way to open up lines of communication with stakeholders.

SAA was put into business rescue by public enterprises minister Pravin Gordhan in early December with the undertaking that the government will provide a further R2bn to facilitate the radical restructuring of the airline.

Business rescue aims to facilitate the rehabilitation of a company that is financially distressed by placing it under temporary supervision and providing for a temporary moratorium on the rights of creditors.

Matuson and Dongwana based their view of likely success on the availability of further funding from the government and the ongoing support of all the stakeholders, including the government, employees, trade unions and trade suppliers.

“The joint business rescue practitioners are of the belief that the process will achieve a better outcome for all stakeholders than an immediate liquidation,” they said in a statement after the meeting. They estimated that concurrent creditors would receive nothing in the event of an immediate liquidation.

PwC, which was mandated to prepare a short-term, cash-flow forecast, had performed an initial high-level calculation.

“SAA leases most of the aircraft and, accordingly, in a liquidation there will be limited assets that can be realised for distribution to creditors. The preliminary view is that after the allocation of the distributable proceeds to preferent creditors (comprising post-commencement financiers, preferent claims of employees, [and] post-commencement unpaid leases), no funds will be available for distribution to concurrent creditors.

“The contingent and damages claims will crystalise on a liquidation, which will increase the quantum of the concurrent claims, which reinforces the preliminary view that the estimated dividend for concurrent creditors is zero cents in the rand.”

Matuson explained that a business rescue of SAA would either involve a restructuring so that the airline could continue operating on a solvent basis; or the development of a plan that results in a better return for the company’s creditors or shareholders than would result from an immediate liquidation.

Creditors unanimously approved a request to give Matuson and Dongwana until February 28 instead of the legislated 25 days after their appointment — which expires on January 13 — to come up with a plan. Matuson said that he and Dongwana are evaluating various scenarios and the funding requirements for each one of them. If possible, they will publish the plan before February 28.

The extension is required as the different scenarios need to be communicated to the various stakeholders so as to determine their preferred scenario.

Since their appointment, the two have met with numerous stakeholders, including the public enterprises department, the National Treasury, trade union representatives, the International Air Transport Association (IATA), other trade partners and lenders.

Global restructuring company Alvarez & Marsal — which has extensive experience in the restructuring of airline carriers and aircraft manufacturing and services — has been mandated by the lenders to provide an objective, impartial insight into SAA’s operations. 

The establishment of a creditors’ committee was also agreed to at the meeting.