Mango creditors accept proposed rescue plan

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It is now vital for Mango to find a private investor.
It is now vital for Mango to find a private investor.

The creditors of Mango on Thursday voted to accept an amended proposed business rescue plan for the low-cost airline.

About 84% of creditors voted in favour of the proposed plan.

A process of finding an investor for Mango will now start, with the hope that an investor will be found by March 2022.

A total of 553 of Mango's 708 employees, or 78%, have applied for voluntary severance packages (VSPs) offered as part of the airline's business rescue process. This amounts to 86% of Mango's monthly salary bill of about R27 million. In addition, the contracts of employees who were hired on a fixed term have been terminated, resulting in a further reduction of the salary bill by 3%, according to the latest status report published by the rescue practitioner Sipho Sono.

Mango went into voluntary business rescue at the end of July this year and has not flown since. It owes R2.85 billion to creditors, and also has about R183 million of unflown ticket liabilities. The only material asset on Mango's balance sheet is a spare engine that was acquired from SAA and which has a current book value of R97 million.

Mango's shareholder, South African Airways (SAA), has stipulated that the funding it provides cannot be used for Mango to resume operations. Because Mango is currently not in a position to resume operations without such funding, Sono says he has had to offer VSPs to all employees except a few critical positions required to keep the airline "on care and maintenance". 

The latest report

The latest report, seen by Fin24, states that a meeting to consider Sono's original proposed rescue plan was held on 15 November 2021.

During this meeting, SAA required an amendment to the proposed plan: it wants Mango to only resume operations once a private investor has been secured "to step into SAA's shoes" as shareholder, according to Sono's report.

Earlier this year Mango was given R819 million from a special allocation approved by Parliament (from R10.5 billion given by Treasury for SAA's own business rescue process). Mango has since received R100 million of the R819 million which it used for payment of salaries for July 2021 to September 2021 and 50% of salaries for October 2021.

Sono's original proposed rescue plan provided for Mango to enter into short-term arrangements with one of its aircraft lessors to provide for a reduced fleet of between three and four aircraft and for the airline to resume flying in December 2021. The original proposed plan wanted to use some of the R719 million funding from SAA to have Mango restart operations on certain domestic routes and at a later stage expand again to some regional routes.

It also proposed that staff numbers be reduced to align with the reduced fleet and to, at the same time, look for a strategic equity partner for Mango to acquire the shares currently held by SAA. The investor would also have to supply funding to enable Mango to procure a new fleet of about eight aircraft.

Sono remains of the opinion that there is a reasonable prospect of Mango being rescued or that the outcome of his amended proposed rescue plan will at least result in a better outcome for creditors and the shareholder than a liquidation of the airline.

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