Several potential investors keen on Mango, says rescue practitioner

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The original proposed rescue plan for Mango wanted to use some of the funding from SAA to restart operations.
The original proposed rescue plan for Mango wanted to use some of the funding from SAA to restart operations.
  • This week, potential investors in low-cost airline Mango were to be notified whether their "expressions of interest" qualify for the next round in the selection process.
  • Business rescue practitioner Sipho Sono says he has heard from several interested parties.
  • Meanwhile, nearly 600 employees accepted Voluntary Severance Packages, reducing the staff headcount to 105.

Business rescue practitioner for low-cost airline Mango, Sipho Sono, says he has received several expressions of interest from potential investors – this on the promised deadline to notify interested parties whether their expressions of interest qualify for the next round in the selection process.

The names of the potential investors have not been revealed.

The selection of the final, chosen investor is at the sole discretion of the business rescue practitioner, according to documents relating to the process.

Mango went into voluntary business rescue at the end of July 2021 and has not flown since. It owes R2.85 billion to creditors, and also has about R183 million of un-flown ticket liabilities. The airline cannot resume operations until and unless it secures a new investor to relaunch the airline.

Lockdown regulations in SA due to the coronavirus pandemic ground air traffic to a halt from 26 March 2020. Mango resumed operations on 20 June 2020 after travel restrictions were relaxed. But there was nevertheless a deep impact on Mango's operations and on 16 April 2021 the board adopted a resolution to place Mango under business rescue. 

The potential investors who submitted expressions of interest will acquire all the shares currently held by Mango's parent company, state-owned South African Airways (SAA). The rescue plan stipulates that any investor who wants to buy the company will have to be able to show it has access to at least R200 million to enable Mango to resume operations and provide for the necessary working capital. 

The process to find an investor kicked off on 2 December 2021 after a majority of creditors adopted an amended rescue plan. The expressions of interest are now being evaluated by Sono to see whether they comply with the minimum requirements previously set out.

According to a letter calling for expressions of interest, Sono would notify interested parties on or before 14 January 2022 whether they have substantially met the relevant requirements. Those who qualify will be able to start their own due diligence process and are expected to submit binding offers in writing by 21 February 2022.

Offers will, among other things, be evaluated on criteria including price offered, certainty and speed of closing the proposed transaction, the extent of the changes proposed to the agreement, how the price will be paid, confirmation of funding capacity and source of funding, operational capacity, B-BBEE status, support from Mango management, impact on staff, and existing potential conflicts of interest between the offeror and Mango. 

Sono believes there is a reasonable prospect of rescuing the company – or that this would deliver a better outcome for creditors and SAA than if the airline were placed in liquidation. 

According to the latest status report from Sono, R520 million of R819 million allocated to Mango from rescue funding Treasury provided to SAA has been received.

A letter asking about the remaining balance was addressed to SAA at the beginning of December. SAA, in turn, asked its own shareholder, the Department of Public Enterprises (DPE), when the balance will be paid. According to the latest status report, the remaining balance is expected sometime in January.

The original proposed rescue plan for Mango wanted to use some of the funding from SAA to have Mango restart operations. The DPE and SAA, however, stipulated that the funding could not be used for Mango to resume operations. Sono therefore looked for an investor to try and get the airline off the ground again.

With regards to the voluntary severance packages (VSPs) offered to Mango employees, the process was initiated in October 2021. A total of 593 were accepted, reducing the staff complement to 105 permanent employees, according to the status report.

A consultation process with a view to retrenchments is also expected to begin among the remaining employees. A total of 41 employees have been retained on limited duration contracts to carry out critical duties until the company resumes operations.

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