Carol Paton Editor at Large
Picture: BUSINESS DAY
Picture: BUSINESS DAY

The proposed business rescue of SAA was again delayed on Thursday after creditors voted for a postponement of deliberations on the plan until July 14.

The new date for the creditors’ meeting is one day before the deadline by which the department of public enterprises must provide a letter of commitment, with the support of the Treasury, to confirm that it will provide funding for a new SAA.

The postponement was requested by several employee groups and unsecured creditors.

The latest delay is one of many that has seen the process of compiling a business plan stretch over six months instead of the statutory 25 working days outlined in the Companies Act.

The process has been fraught from the start with uncertainty over funding from government that is required for the turnaround.

The absence of further government funding prompted business rescue practitioners Siviwe Dongwana and Les Matuson to conclude that the best path of action for SAA was a structured wind down. This would involve selling those parts of the business that have value to interested buyers.

But minister of public enterprises Pravin Gordhan, the sole shareholder representative, has said "there will be no winddown and no liquidation of SAA".

Instead of a winddown, Dongwana and Matuson then produced a dramatically different plan for a restructured SAA.

The plan hinges on a hefty transfer from the fiscus made up of R2,8bn start-up capital, retrenchment pay of R2,2bn as well as other payments, altogether amounting to R10,4bn.

However, in his supplementary budget tabled in parliament on Wednesday, finance minister Tito Mboweni did not provide any additional funding for SAA.

While it remains plausible that a funding commitment to SAA could still be provided that seems extremely unlikely. The department of public enterprises has said that there are several interested buyers for SAA, which is another possible avenue for funding.

The plan draws a line on waiting any longer for finality, stating that if the funding is not secured by July 15 then the business rescue plan falls away. At that point, creditors could either ask for an amendment to the plan or SAA will be liquidated.

At Thursday’s meeting, a majority coalition of trade unions including Numsa, SA Cabin Crew Association and SAA Pilots Association spoke against the proposed plan, saying they saw no prospect of it resulting in a new, restructured SAA. Three smaller employee groups supported the plan.

While the biggest creditors to SAA — lenders and lessor companies — are secured lenders and will get paid what they are owed anyway, concurrent creditors stand to get 7.5c in the rand, from revenue flows over three years.

The concurrent creditors and majority unions argue that the plan prejudices them and favours the shareholder, which at the end of the process according the plan, will emerge with an unencumbered business.

patonc@businesslive.co.za