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SAA’s business rescue professionals received a letter from the government, prior to a meeting of creditors, stating that it was committed to providing funds to the troubled state airline.
A meeting of creditors was called for Friday to review SAA’s business rescue plan after the money needed to finance the plan was not obtained.
Practitioner Siviwe Dongwana told the creditors’ meeting that the communication from the government, supported by the Treasury, said there was a “very clear commitment from the cabinet” to provide R10.5bn.
“The letter also articulates that the mechanisms and timelines have not yet been finalized and it is for this reason that we believe this gives us a third, and perhaps a more important option … that the company will have government funding. This will allow it to restructure its operations and will also allow it to implement the business rescue plan, ”he said at the meeting.
Dongwana said that the letter was only received on Friday morning, and that practitioners had to engage with the government in detail to get a clear understanding of the deadlines. He said that only in the following week could they return to all affected parties with information on the deadlines and the flow of funds to the company.
The creditors meeting concluded in less than an hour, due to the letter received from the government. Dongwana said that the business rescue practitioners will contact all parties next week after they have agreed with the government on the schedule to provide the funds.
The absence of the necessary funding puts SAA again in danger of liquidation, a fate the government has worked hard to avoid.
The public companies department confirmed that the government was shifting funding priorities to finalize SAA’s restructuring.
He said an announcement to this effect would be made in the Adjustment Appropriation Bill, which will soon be presented to Parliament.
“As the restructuring process should approach completion in the next few weeks, lenders will be asked to fund the restructuring process and meet the commitments of voluntary severance packages and staff reductions,” the department said. .
He said that at the same time, the department would continue to evaluate the 20 “unsolicited” expressions of interest from private sector funders, private equity investors and partners for a future restructured SAA.
The department was emphatic that the national airline would not be liquidated.
Dongwana told the creditors’ meeting on Friday, before informing him of the government letter, that if the funds were not insured, the only options were liquidation 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 have also exhausted their initiatives to extend the financial track in order to continue the operations of the company,” he said.
Dongwana said it was important for business rescue professionals to carefully consider the options available to the company and come to the creditors’ meeting with appropriate proposals on the way forward.
“As business rescue professionals, we believed the options available to us were that we could have a hiatus … or a liquidation,” he said.
Meanwhile, the unions have written to the government threatening legal action if SAA and SA Express (SAX) are liquidated.
The National Union of Metalworkers of SA (Numsa) and the Association of Cabin Crew Members of SA (Sacca) said they had sent an official notice to the office of the presidency, the department of public companies, the Treasury and the office of the president of the National. Assembly, informing them of its intention to legally challenge the liquidation of the airlines in crisis.
“We are challenging the government for not enforcing the law by not providing funds for SAA and SAX and for not ensuring 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 R10.1 billion to settle outstanding obligations and restart operations.
The public companies department and the Treasury offered professionals a commitment to “mobilize” the necessary financing from sources other than the Treasury.
Most urgent about this is short-term financing of R2.8bn, which is required to restore solvency and to allow professionals to return the company to their address and board. Employees are also eager to receive the severance packages promised by the department, for which R2.2 billion is needed.
The department has tried to attract an equity partner and organize financing from other sectors, hiring Rand Merchant Bank as transaction advisers.
It is understood that the national banks that have lent to SAA previously refused to do so this time.
