SAA’s future again hangs in the balance amid scant details of rescue funding
The future of SAA once again hangs in the balance as business rescue practitioners wait for the government to provide details of funding for their plan to rescue the ailing state-owned airline.
A creditors’ meeting was called for Friday to review the SAA business rescue plan after the required money to fund the plan was not secured.
Practitioner Siviwe Dongwana told the meeting that a communication from the government, with the support of the Treasury, stated that there was a “very clear cabinet commitment” to provide R10.5bn.
“The letter also articulates that the mechanisms and the timelines are yet to be finalised and it is for this reason that we believe that this provides us a third, and perhaps a more important option ... that the company will have the funding from government that will enable it to restructure its operations and will also enable it to implement the business rescue plan,” he said.
Dongwana said the letter was only received on Friday morning, and the practitioners had to engage with the government in detail to get a clear understandings of the timelines. He said only in the next week would they be able to come back to all affected parties with information on the timelines and the flow of funds into the company.
The creditors’ meeting concluded after less than an hour, due to the letter received from the government. Dongwana said the business rescue practitioners would communicate with all parties after they had engaged with the government on the timeline for providing the funding.
The absence of the necessary funding once again puts SAA in line for liquidation, a fate the government has tried hard to avoid.
The department of public enterprises confirmed that the government was reprioritising funds to finalise the restructuring of SAA.
It said an announcement to this effect would be announced in the Adjustments Appropriation Bill, which will be introduced in parliament soon.
“Because the restructuring process should be brought closer to finalisation in the next few weeks, lending institutions will be requested to finance the restructuring process and honour commitments for voluntary severance packages and retrenchments,” the department said.
It said that at the same time, the department would continue to assess the 20 “unsolicited” expressions of interests from private-sector funders, private equity investors and partners for a future restructured SAA.
The department was emphatic that the national carrier would not be liquidated.
Dongwana told the creditors’ meeting on Friday, before informing it of the government’s letter, that if the funds were not secured the only options were either a winding down of the company or liquidation.
“As a company we are in a position where we have exhausted the funds within the company and the business rescue practitioners also exhausted their initiatives to extend the financial runway in order to continue with the operations of the company,” he said.
Dongwana said it was important for the business rescue practitioners to carefully consider the available options to the company and come to the creditors meeting with appropriate proposals on the way forward.
“As the business rescue practitioners we believe the options available to us was that we could have a wind down ... or a liquidation,” he said.
Unions in the meantime have written to the government threatening to take legal action if SAA and SA Express (SAX), are liquidated.
The National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca) said they had sent a notice to the office of the presidency, the department of public enterprises, the Treasury and the office of the speaker of the National Assembly, informing them of their intention to legally challenge the liquidation of the ailing airlines.
“We are challenging government for not giving effect to the law by failing to provide funding for SAA and SAX and for failing to ensure that they are viable and sustainable,” the unions said.
SAA has been in business rescue since December 5. The business rescue plan was approved by creditors in mid-July but required R10.1bn to settle outstanding obligations and restart operations.
The department of public enterprises and the Treasury gave the practitioners an undertaking “to mobilise” the necessary funding from sources other than the fiscus.
Most urgent of this is short-term funding of R2.8bn, which is required to restore solvency, and to enable the practitioners to hand back the company to its management and board. Employees are also anxious about receiving retrenchment packages promised by the department, for which R2.2bn is needed.
The department has tried to attract an equity partner and arrange finance from other quarters, engaging Rand Merchant Bank as transaction advisers. It is understood domestic banks that have lent to SAA previously declined to do so this time.
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