Kulula.com Boeing 737 800 (Supplied)
A meeting set for the creditors of Comair to vote on proposals made by its business rescue practitioners has once again been postponed at the request of creditors.
The meeting was initially set for Friday, then postponed to Monday, also at the request of creditors. It has now been postponed to Tuesday, July 21.
A letter to affected parties, dated July 14, sets out the matters on which creditors have to vote at the meeting.
The airline’s joint rescue practitioners, Shaun Collyer and Richard Ferguson, have proposed an agreement to double their tariff of R2 000 per hour provided for by the Companies Act, retrospectively, once the business rescue plan is approved.
They argue that the hourly fee stipulated in terms of the act has been unchanged since 2011. They believe R4 000 per hour would be more market related “for the specialist skills and expertise required of independent professionals acting as
business rescue practitioners for a company of the size and complexity of Comair”.
Comair owns Kulula.com and also operates British Airways domestically under a license agreement. The airline operator, which was struggling before the lockdown began at the end of March, which grounded all its flights, went into business rescue in May.
It is estimated that the 77-year-old company had R7.42 billion in assets on its balance sheet at that time, compared to liabilities of R5.48 billion.
Comair stands to receive just 7.5 cents in the rand on the R790 million that was unrecoverable after SAA entered business rescue in early December. The money was for outstanding payments still owed by SAA to Comair on a R1.1 billion settlement in a Competition Commission case.
The letter from the practitioners also states that, immediately following the commencement of the business rescue proceedings, the practitioners’ initial evaluation of the cash position and projected cash flows revealed the need for the company to raise “significant” amounts of new capital as post-commencement funding in order to ensure the survival of the company in the short-term.
Furthermore, funding was also needed to recapitalise the company in order to facilitate the resumption of operations and address the medium and long-term sustainability of the company.
The practitioners say they, therefore, sought assistance from various local and international independent specialist investment banking advisors. These attempts were, however, unsuccessful, either because they were refused directly or because the practitioners felt the terms offered were unaffordable terms.
The practitioners subsequently engaged the services of the corporate finance team within Redford Capital, an advisory services company of which the practitioners are directors. A comprehensive capital raising process was undertaken. Redford Capital engaged with 47 parties, received 19 signed non-disclosure and confidentiality agreements, and received four expressions of interest.
According to the letter, currently the Redford Capital team is engaging with the providers of several “detailed non-binding expressions of interest”. They are trying to obtain an offer that would enable the implementation of a business rescue plan to be proposed.
The practitioners propose that Comair and Redford Capital conclude an agreement stipulating a monthly retainer fee of R250 000 and a “success fee” calculated at 1% of the gross funding raised for Comair during the business rescue proceedings – excluding short term interim bridge financing received from lenders up to the point of the adoption of a business rescue plan.
As the success fee will only be paid to Redford Capital on it successfully raising sufficient capital for Comair to resume operations once unrestricted air travel is allowed, it is essentially self-funding.
Comair’s creditors have granted its rescue practitioners an extension until 28 July to publish a business rescue plan. This was after an interested investor group requested more time to progress its offer.
The National Union of Metalworkers of South Africa (NUMSA) said on Monday it is “disturbed” that the Comair rescue practitioners are requesting an increase on their hourly rate from R2 000 to R4 000 per hour.
It is especially concerning for NUMSA in the light of the financial hardship Comair employees are facing. Late in April Comair had asked staff to either take leave or unpaid leave for the extended lockdown period, as it could not afford to pay employees their full salaries.
The union also feels there is a conflict of interest in Comair concluding an agreement with Redhill Capital, of which the practitioners are directors.
NUMSA is demanding a forensic investigation into the activities of the rescue practitioners.