Will the SAA rescue deal fly?
JOHANNESBURG – The government is set to dip into its own pocket to bail out SAA and save the struggling airline from liquidation while asking various lenders to finance the R2 billion retrenchment process.
The Department of Public Enterprises (DPE) on Friday confirmed that it would present an Adjustment Appropriation Bill in Parliament to reprioritise at least R10bn from its R312.8bn budget to help implement SAA’s business rescue plan.
“An announcement to this effect will be announced in the Adjustments Appropriation Bill, which will be introduced in Parliament soon,” the DPE said. “The national carrier will not be liquidated.”
Finance Minister Tito Mboweni’s emergency budget in June did not allocate any funding to SAA. The troubled state-owned airline needs at least R10bn in short-, medium- and long-term funding to restart its operations – R2.27bn of which is targeted for voluntary severance packages (VSPs) for at least 3 000 workers.
The DPE said that it would request lending institutions to finance the SAA restructuring process and honour commitments to pay for VSPs and retrenchments of workers.
It said it would also continue to assess the 20 unsolicited expressions of interests from private sector funders, private equity investors and partners.
SAA business rescue practitioners (BRPs) on Friday gave the government another week to come up with the required funding to save the airline from being wound down.
The BRPs told the airline’s creditors that the government has committed to providing them with a R10.5bn lifeline with no timelines yet confirmed. Rescuer Siviwe Dongwana said the government had written to them before the meeting to confirm that it would fund the rescue process.
He said the government’s letter clearly stated that there was a Cabinet commitment, with the support of the National Treasury, to provide funding to SAA of R10.5bn.
Dongwana, however, refused to make the letter from the National Treasury public.
“The letter also articulates that the mechanisms and the timelines are yet to be finalised,” he said, adding that the BRPs will be engaging with the government in detail to get a clearer understanding.
Only in the following week will SAA rescuers be in the position to notify creditors whether the rescue plan would be implemented or SAA would be wound down or liquidated.
“It becomes important to us as the practitioners in assessing the timeline of that funding being made available to answer whether or not there remains a case for a wound down or liquidation and advise creditors accordingly,” Dongwana said.
“But if the funds flow early enough, they eliminate the need for a wind down or a liquidation.” This week, the government told the BRPs it anticipated the required funding would be made available by Wednesday.
However, by Thursday the rescuers had heard nothing, prompting them to call the meeting with creditors. Dongwana said the commitments to paying various affected parties remained intact as the business rescue plan that was voted on and approved on July 24 had not been amended.
“We committed R600 million to concurrent creditors which would be payable over a three-year period. That remains and has not been amended,” Dongwana said.