A view of SAA airplanes at Cape Town International Airport on February 18, 2020.
Gallo Images/Jacques Stander
- Government has been given a small extension to comply with an unmet guarantee condition in the SAA business rescue plan.
- If the condition is not met by Monday 27 July, the plan will be deemed “unimplementable”.
- But that’s not the end of the road, necessarily – a meeting would then be convened on 30 July for creditors to consider amending the plan, again.
Creditors of South African Airways on Friday gave government a little bit more time to comply with an unmet guarantee condition required by the previously accepted business rescue plan.
The plan stipulated that all outstanding conditions had to be met by 22 July, failing which creditors had to meet on Friday 24 July to vote on whether the plan could be amended.
The creditors have now approved such an amendment, which gives government until 27 July 2020 to comply with the outstanding condition.
Joint rescue practitioner Siviwe Dongwana informed the creditors that, if the condition is not met by the extended date, the plan will be deemed “unimplementable” and a meeting of creditors will be convened on 30 July 2020 for creditors to consider amending the plan once again.
The unmet condition relates to government having to provide confirmation satisfactory to the Development Bank of Southern Africa (DBSA) as well as to pre- and post- rescue commencement lenders, that the guarantees issued to them “shall continue in full force and effect until the lender claims are discharged in full as contemplated in the rescue plan”.
Creditors were informed that meetings between government, the banks and the rescue practitioners are “ongoing” in an attempt to meet the unmet condition, mainly trying to fit it into a “legal framework” which is acceptable to all parties.
Dongwana pointed out that SAA is the first state-owned entity to go into business rescue and there are a number of regulatory issues the practitioners encountered as the rescue process unfolded.
The business rescue process is dictated by the Companies Act, while, being an SOE, the Public Finance Management Act applies to SAA.
Four large SA banks hold government guaranteed debt totalling R16.4 billion and which dates from before the airline having gone into business rescue. Money for this has been allocated in past national budgets already. The DBSA provided post rescue commencement credit of R3.5 billion to the airline, while banks provided another R2 billion in post commencement credit.
The unmet condition, therefore, means that government must still confirm that it will pay in terms of the guarantees given to these pre and post commencement creditors.
It is still not clear where the about R10.3 billion in additional funding needed to implement the plan will come from. The most crucial amount to start off with would be about R800 million for post-commencement creditors, about R2.2 billion for voluntary severance and retrenchment packages as well as about R2 billion for working capital.
The plan called for the Department of Public Enterprises and National Treasury to provide a letter of commitment regarding this additional funding. While the two departments did provide such a letter by the deadline of 15 July, the letter does not, however, state whether the additional funding required is available and what the source of it is. The letter is simply a commitment to “mobilise” the funding.