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SAA is in a dangerous situation again. (Photo: Leila Dougan)
The troubled airline requires at least R26.7 billion in short, medium and long-term funding from the government to restart operations in January 2021. But so far, the government has provided SAA with R9.3 billion in funding to pay your lenders.
SAA is once again in a dangerous situation as the state airline is running out of money to finance its operations, which could jeopardize the implementation of its business rescue plan.
It also puts SAA in danger of liquidation, which would imply its death as its assets would be sold to pay off creditors.
SAA business rescue professionals Siviwe Dongwana and Les Matuson told creditors on Thursday that the airline’s financial situation is “dire” because the working capital available to finance its operations is “on the verge of exhaustion.”
This is because the government, which is SAA’s sole shareholder, has yet to raise the full amount of money that rescue professionals require to restructure the airline and save it from collapse.
The National Treasury and the Department of Public Companies joined forces in July 2020 to “mobilize funds” for the restructured SAA, but also said that the money for the airline could not come from the fiscus.
In July, SAA creditors voted overwhelmingly in favor of the corporate bailout plan, which requires at least R26.7 billion in short, medium and long-term government funding to restart the airline’s operations in January 2021. No However, at least R10 .4 billion of the required R26.7 billion is new money.
Since the rescue plan was approved by creditors, rescuers said the government has only provided the airline with R9.3 billion in funds to pay off its lenders. This is not new money because it is part of the 16.4 billion rand already allocated by Finance Minister Tito Mboweni in the February 2020 budget for SAA to repay its historic debt with commercial banks, which are the largest creditors of the airline and whose loans are guaranteed by the government.
Rescue practitioners said that the R10.4 billion in new funds that are immediately required from the government “have not yet been made available to the company.”
This money is needed to pay SAA creditors (whose debt is not guaranteed by the government), downsizing packages to 2,600 affected workers and to finance the restart of the airline’s commercial flight operations.
“In ongoing commitments on this issue, the government has continued to express its commitment to make this financing available and has pledged to do so over the course of the next week,” the rescue professionals said in a letter to creditors.
In a statement, the Department of Public Enterprises said that efforts to finalize the business rescue process are ongoing and that “a decision on funding sources will be announced soon.” But Business maverick understands that the department will make funds available to SAA next week.
The department said it is still evaluating offers from private sector investors who plan to inject capital into SAA in exchange for a stake in the airline. “Several commitments have been made with potential partners, and the interest is encouraging that a suitable long-term investor will be found to enable the relaunch of the airline and its divisions and subsidiary businesses.
“The department remains confident that a solution will be found in time to avoid the SAA liquidation,” he said.
If the government does not provide funds to rescue professionals by September 17, 2020, rescue professionals will schedule a meeting with creditors on September 18 to determine the future of SAA and business rescue procedures.
Without funding, rescue professionals will not be able to deliver a restructured SAA to their management and board. Rescue practitioners will also be required by the Companies Act, which governs procedures for rescuing companies in SA, to declare that SAA has no reasonable prospect of rescue and place it in liquidation. DM / BM
