SAA business rescue practitioners 'assessing impact' of government's refusal to pay further R10bn
SAA's business rescue practitioners are assessing the impact of the government turning down a request for R10bn in extra funding.
On Tuesday, the business rescue practitioners received a letter from the ministry of public enterprises stating that the government would not support an extension of the foreign currency borrowing limit to permit foreign financing of the business rescue plan.
The ministry said the government was unable to provide additional funding to sustain the business rescue process, or for a care and maintenance budget as proposed by the business rescue practitioners.
“It is for this reason that we as the business rescue practitioners are providing the necessary and critical update to all the affected parties.
“We are assessing the impact of this development on the business rescue process and will communicate any decisions to be made in due course,” the practitioners, Siviwe Dongwana and Les Matuson, said in a note to creditors on Tuesday.
The practitioners said that, in the interim, the company was conducting charter operations for the repatriation of foreigners to various countries and to fly South Africans stranded in foreign countries home.
“In addition, the cargo division has increased its activity during this time, including bringing into the country critical medical supplies and equipment necessary for the fight against the Covid-19 virus."
The practitioners, who were appointed in December 2019 when the company was placed into voluntary business rescue, said government had announced R4bn would be made available for post-commencement finance (PCF) to, among others, provide for the company to trade up to January 31 2020.
They said in January that the government had indicated its preference for the restructuring of SAA, which would have seen the highest retention of jobs possible and the company no longer being reliant on government funding in the future.
“This scenario required a minimum restructuring cost of R7.7bn to be utilised, [among others] as follows: dividend to current creditors, restructuring costs, retrenchment costs [and] recapitalisation of subsidiaries.”
The practitioners said it was anticipated that the restructuring funding would be provided in the budget speech by the finance minister on February 26.
However, the budget was silent on the amount of the restructuring funding for SAA but provided an allocation of R16.4bn for the repayment of legacy debt and post-commencement finance.
“The impact of the lack of clarity on the funding of the restructuring scenario supported by government meant that the business rescue plan could not be published while this uncertainty continued.”
After the lockdown commenced on March 27, SAA ceased operations.
The practitioners said on April 2 they had updated the shareholder (the government) on how Covid-19 was affecting the business of the company. The letter also requested an extension of the foreign borrowing limits for the company, as required by the potential funders of an overall restructuring and care and maintenance period.
The practitioners received a reply from the ministry on Tuesday, which said they must consider their options "within the available resources".