SAA business rescue: Creditors have first meeting

The first meeting of creditors of South African Airways (SAA), which went into voluntary business rescue early in December, took place on Friday.

It was held in terms of the business rescue requirements of the Companies Act.

According to a statement issued on behalf of SAA's joint business rescue practitioners (BRPs), Les Matuson and Siviwe Dongwana, the objectives of the first meeting included informing creditors whether there was a reasonable prospect of a successful business rescue, and to receive valid claims.

Matuson says the aim of the business rescue process is to either rescue SAA through restructuring - in order to maximise the likelihood of the state-owned airline continuing on a solvent basis - or to develop a plan that would deliver a better return for creditors or shareholders than would result from immediate liquidation.

The joint BRPs believe the business rescue process will achieve a better outcome for all stakeholders than an immediate liquidation.

'Reasonable prospect' of successful rescue

"Based on the availability of further funding, which National Treasury has undertaken to provide, and the ongoing support from all the stakeholders, including government, employees, trade unions and trade suppliers, the joint business rescue practitioners are of the opinion that there is a reasonable prospect of a successful business rescue, notwithstanding the inevitable risks and challenges," according to the statement.

A short-term cash flow forecast, done for the BRPs by PwC, reflects that SAA leases most of the aircraft it uses and, accordingly, in a liquidation, there will be limited assets which can be realised for distribution to creditors. The preliminary view by the BRPs is that, in a liquidation, there would be no funds available to distribute to concurrent creditors once preferent creditors had been paid.

The creditors present at the meeting voted unanimously in favour of giving the BRPs and extension until the end of February to publish their proposed business rescue plan.

Minister in the Presidency Jackson Mthembu said earlier this week that Cabinet was confident in the business rescue processes and that equity partners in the business rescue would be announced soon. Mthembu indicated that Matuson would "work with the black partners that will be announced in due course".

Morne du Preez, CEO of Tourvest Travel Services and a member of the board of Tourvest Holdings, told Fin24 that its first stance, from a tourist perspective, is to support SAA.

"We are predominantly corporate players and SAA is a critical player within the corporate travel space, domestically and internationally. We view SAA as a quality airline and it would be my first choice for travelling into Africa.

"Tourvest is proudly South African and SAA promotes South Africa. We want to grow SA and ensure the country has a sustainable national carrier," he told Fin24.

"We will see how SAA's business rescue unfolds and we are positive about President Cyril Ramaphosa's decision to follow this route. At least educated business decisions can now be made, decisions which will be the best for the airline and the greater South Africa at large." 

Fin24 reported at the beginning of November that SAA was said to be scrambling to obtain R2bn before the end of the month. At the time of SAA going into business rescue, Public Enterprises Minister Pravin Gordhan said in a statement he envisioned that some existing lenders to SAA would provide R2bn in post (business rescue) commencement finance guaranteed by the state and "repayable out of future budget appropriations in order for the business rescue process to commence and to enable SAA to continue to operate".

Government, through National Treasury, would also provide an additional R2bn of post commencement finance in "a fiscally neutral manner," he said, among other planned processes. Government is the airline's sole shareholder. 

Over the past 13 years, SAA has incurred over R28bn in cumulative losses. In the medium-term budget policy statement, Finance Minister Tito Mboweni announced that the state would pay off SAA's government-guaranteed debt of R9.2bn over the next three years to honour the airline's contractual obligations.

Towards the end of November, the National Union of Metalworkers of South Africa and the South African Cabin Crew Association embarked on a week-long strike at SAA, demanding, among other things, an 8% wage increase. SAA estimated that the strike, which led to the cancellation of numerous flights, cost it about R52m a day.

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