JOHANNESBURG - Troubled national carrier SAA yesterday received a R3.5 billion shot in the arm from the Development Bank of Southern Africa (DBSA) following weeks of the government scrambling to secure funding to keep it afloat.
The business rescue practitioner confirmed that SAA had received the funding, which would be fully guaranteed by the National Treasury. Louise Brugman, the business rescue practitioners’ spokesperson, said the team would immediately draw R2bn from the loan facility. “Discussions held with financial institutions have been fruitful with the DBSA offering to provide the next tranche of post commencement funding for a total amount of R3.5 billion, with an immediate draw-down of R2bn,” Brugman said.
“Furthermore, funding for the restructuring phase after the plan is adopted is being considered by potential funders.” SAA was put into business rescue last year with the government promising to pump R2bn into the process, saying that a further R2bn would come from lenders. The business rescue practitioners are expected to table their turnaround strategy by the end of the month. The government missed the bailout deadline earlier this month, leading to speculation that it had washed its hands of SAA.
However, last week Finance Minister Tito Mboweni tried to restore investor confidence on the outlines of the World Economic Forum, saying that the government was committed to giving SAA further bailouts, but needed to find the money. This month SAA culled nearly 40 domestic and international flights after the government failed to give it a R2bn to meet its financial obligations.
SAA also put some of its Airbus planes on sale, although it later said that this was part of an ongoing process to renew its ageing fleet. SAA has not posted any profits since 2011 and has not published its financials in the past two years. Last year the airline said it had lost more than R10.4bn in the past two financial years, while its losses for the year ended in March reached R5.5bn. The airline’s liabilities are believed to have exceeded its assets by nearly R13bn.
Former chief executive Vuyani Jarana resigned abruptly last year, citing lack of political support for the airline’s turnaround strategy. Its board was also rocked by the resignation of Mark Kingston two weeks ago.
SAA has received more than R20bn in bailouts and owes creditors billions of rand. Neither SAA nor DBSA were immediately available for comment. But Burgman said the DBSA injection would go a long way in stabilising the airline’s porous finances.
“The restructuring of SAA will provide an opportunity to develop a sustainable, competitive and efficient airline with a strategic equity partner remaining the objective of government through this exercise and will result in the preservation of jobs wherever possible,” Burgman said.
“SAA is a key strategic asset which needs to be positioned to provide reliable connectivity to markets within South Africa, the African continent as well as servicing selected international routes.”