Court says SAA creditor meeting to go ahead
Public enterprises welcomes the judgment, saying it believes the business rescue process can see SAA become sustainable and competitive
The meeting of SAA’s creditors scheduled for Thursday will go ahead after Judge Leicester Adams found that the application brought by SA Airlink to interdict the meeting was not urgent.
On Wednesday, Adams struck the matter from the roll for this reason.
“I am not convinced that the applicant has passed the threshold prescribed ... for urgency and I am of the view that the application be struck from the roll for lack of urgency,” he said.
SA Airlink, a creditor of SAA, attempted to interdict the meeting from going ahead on grounds that the business rescue practitioners were not sufficiently independent and that they were unduly influenced by the shareholder — the department of public enterprises — in drawing up the plan.
Arguing for SA Airlink, advocate Rafik Bhana said that business rescue practitioners Les Matuson and Siviwe Dongwana had done “a complete U-turn” between the draft business rescue plan — which had proposed a structured wind-down — and the final one, which envisages that SAA be restructured using capital from the government.
SA Airlink is one of the smallest creditors of SAA and is owed about R700m, of which it is likely to see very little. According to the draft business plan published last week, concurrent creditors will receive 7.5c on the rand from revenue flows over the next three years, assuming the revenue is realised. Lenders and lessors, whose loans are guaranteed, are to be repaid in full by the National Treasury.
SAA has been in business rescue since December 5. The intention of business rescue is to give the business a chance to be saved in the interests of creditors and employees. But in this case, as the business rescue plan commits the Treasury to repaying all the shareholder’s debt, the department of public enterprises will be left with an unencumbered business and concurrent creditors with nothing.
If successful, the interdict could have further delayed SAA’s costly and lengthy business rescue process, which has been under way for six months.
The draft business plan for a restructured SAA depends on a R10.4bn payment from the Treasury for start-up capital and settling liabilities. There has been no confirmation from the Treasury that it intends to provide this funding.
There was no money set aside in finance minister Tito Mboweni’s supplementary budget on Wednesday for the state-owned airline.
It is unknown how creditors — the biggest and most powerful of which are SA’s commercial banks — will vote at the meeting. While they stand to be paid out regardless, there are ethical questions regarding the rescue, particularly the one raised by SA Airlink in its application, that the plan unfairly advantages the shareholder, leaving it with an unencumbered business.
The department of public enterprises welcomed the court’s judgment, saying it hopes there will be no further delays to vote on the business rescue plan.
“The [department] believes a positive vote to finalise the business rescue process would be the most expeditious option for the national carrier to restructure its affairs, its business, debts and other liabilities, resulting in the emergence of a new viable, sustainable, competitive airline that provides integrated domestic, regional and international flight services,” it said.
“The government is committed to engaging constructively towards the national interest objective of such an airline in a constrained fiscal environment, taking into account the impact of the Covid-19 pandemic on this situation.”
The department has urged creditors, employees and other stakeholders to vote in support of the plan, saying it would result in a better return for them than a liquidation of the airline.
Update: June 24 2020
This article has been updated with comment from the department of public enterprises.