The National Treasury wants strict conditions attached to any guarantees it provides for loans to the country’s embattled state airline, according to two sources.
The National Treasury wants strict conditions attached to any guarantees it provides for loans to the country’s embattled state airline, according to two sources.

National Treasury seeks conditions on SAA loan guarantees

By Bloomberg Time of article published Sep 28, 2020

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JOHANNESBURG - The National Treasury wants strict conditions attached to any guarantees it provides for loans to the country’s embattled state airline, according to two sources.

Treasury and Department of Public Enterprises officials met Saturday to discuss ways to restart South African Airways, the sources said, asking not to be identified because the talks are private. Representatives of two South African banks attended the talks, they said.

SAA halted operations and sought bankruptcy protection in December. The carrier’s administrators say R10.5 billion is needed for the airline to resume operations. Finance Minister Tito Mboweni is prepared to provide guarantees on R4bn to R5bn of that amount, subject to stringent criteria, the sources said.

It’s unclear where the funding would be sourced from and there’s no agreement yet on any bailout, the sources said. President Cyril Ramaphosa has backed the airline’s rescue, they said.

National Treasury spokeswoman Mashudu Masutha-Rammutle and SAA spokesman Tlali Tlali referred requests for comment to the DPE, whose spokesman Sam Mkokeli didn’t immediately respond to a request for comment. The carrier’s business-rescue practitioners didn’t immediately respond to a request for comment.

Equity Partners

Treasury guarantees may encourage private lenders to provide financing to SAA, the sources said. Any government funding may also help ensure a future equity-partner deal, which is currently envisaged by the end of the year, the sources said.

Twenty private-sector funders, private-equity investors and partners have submitted unsolicited expressions of interest in a restructured SAA, and those are being assessed, the Department of Public Enterprises said.

Ethiopian Airlines Group is in talks with SAA about providing assistance, other sources have said. The Addis Ababa-based carrier is seeking control, possibly in the form of a management contract, and that may be a sticking point, the sources said.

BUSINESS REPORT

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