The publication on Tuesday evening of the much-delayed business rescue plan for state-owned South African Airways (SAA) reveals that creditor claims could total as much as R38.4 billion.
This excludes the R9.2 billion owed to various local banks and financial institutions before the company was placed in business rescue. A further R2 billion in finance post the airline entering business rescue was provided by five commercial banks, with the well-known R3.5 billion loan from the Development Bank of South Africa (DBSA) on top of that.
An allocation totalling R16.4 billion to repay the bank lenders was announced by National Treasury in the February budget. This was never a new ‘bailout’ as these loans had been guaranteed by government.
The business rescue plan for the first time reveals how much funding has been provided by which financial institution. Between them, Absa and Nedbank have exposure totalling R5.2 billion. FirstRand is the least exposed of the five commercial banks, with a total of R949 million in funding (including the loan provided by Ashburton). These amounts do not include any capitalised interest since the airline was placed in business rescue.
| Pre-commencement lender | Facility type | Limit/exposure |
| Nedbank | Term loan | R1.8bn |
| Absa | Term loan | R1.7bn |
| Investec | Term loan | R1.27bn |
| Standard Bank | Structured loans | R1.06bn |
| Nedbank | Subordinated long term loan | R784.7m |
| FirstRand | Term loan | R585m |
| Absa | Bridge | R558.5m |
| Investec Asset Management (now Ninety One) | Term loan | R253.1m |
| FirstRand | General banking facility | R250m |
| Nedbank | General banking facility | R200m |
| Standard Bank | General banking facility | R250m |
| Sanlam | Term loan | R168.8m |
| Absa | Call loan | R130m |
| Ashburton Investments (part of FirstRand) |
Term loan | R113.9m |
| Momentum | Term loan | R105.5m |
| R9.22bn |
* Utilisation under general banking facilities and call loan will, by definition, fluctuate.
Of the R2 billion in post-commencement finance (PCF) provided by the five banks, a full 60% (or R1.2 billion) was stumped up by Absa and Nedbank. This PCF funding is due to be repaid by July 31.
| Post-commencement finance bank lender | Limit/exposure |
| Nedbank | R648.9m |
| Absa | R556.6m |
| Standard Bank | R304.8m |
| Investec | R294.9m |
| FirstRand | R194.7m |
| R2bn |
Under the R16.4 billion allocation from Treasury, the R3.5 billion DBSA loan plus R168 million in interest will be repaid during the course of this fiscal. A further R3.8 billion will be repaid to local banks and finance institutions this year, with the same amount scheduled to be paid next year. The balance (R1.6 billion) will be paid in 2022/23. The payments are to be made by August 31 each year and exclude interest, which the business rescue practitioners estimate totals R1.8 billion.
The bank financing is the easy part …
It’s the creditor claims where things get chaotic.
The list of creditors runs to 33 pages, with more than 1 000 separate claims registered. Many of these are from the same company, likely as they pertain to different contracts. As examples, catering subsidiary Air Chefs has six claims, the Airports Company of South Africa (Acsa) has 14.
The R38.381 billion total is the worst case contemplated as it uses the greater amount between a creditor’s claim and the airline’s records.
In many cases, SAA has no record of claims. In other cases, its records show a vastly larger sum owed than the creditor’s claim. This is particularly prevalent when it comes to certain leasing entities as the amount would effectively be the entire lease liability.
There are 24 creditors where – based on their claims or the amounts reflected in SAA’s records – there is an exposure that is greater than R100 million.
Aircraft leasing companies comprise 21 of the 24 largest creditors (the Air Mauritius exposure is related to a lease deal).
| Creditors above R100m | Claim | Company records | Greater of the two |
| AirCastle (Wells Fargo) | – | R7.12bn | R7.12bn |
| Oriental Leasing 7 Company | R1.98bn | R5.98bn | R5.98bn |
| Aero Design Global (Goshawk) | R8.3m | R2.38bn | R3.38bn |
| Metal2017-1 Leasing XV | R2.27bn | R2.32bn | R2.32bn |
| AC Finance MSN1779 Ltd | R5.9m | R2.27bn | R2.27bn |
| Athena4 Aviation Leasing | R1.3m | R2.21bn | R2.21bn |
| GE Capital Aviation Funding | – | R2.19bn | R2.19bn |
| TC Skyward Aviation Ireland | R881.9m | R1.8bn | R1.8bn |
| Air Mauritius | R2.3m | R1.79bn | R1.79bn |
| Avolon Aerospace AOE158 | – | R1.77bn | R1.77bn |
| Robert Watson | R1.7bn | – | R1.7bn |
| Comair | R790.3m | R790.3m | R790.3m |
| Pembroke Aircraft Leasing 4 | – | R772.6m | R772.6m |
| ZS-SXA/B/C Ltd | R3.6m | R700.7m | R700.7m |
| CDB Aviation | R618.3m | R687.6m | R687.6m |
| Wilmington Trust SP Services | R416.9m | R528.7m | R528.7m |
| CIT Aerospace International | – | R485.3m | R485.3m |
| AerCap Ireland Ltd | R13.3m | R336.4m | R336.4m |
| GASL Ireland Leasing 6 | R155m | R199.2m | R199.2m |
| IAE International Aero Engines | R163.3m | R162.9m | R162.9m |
| International Lease Finance Corp | R138.9m | R5.2m | R138.9m |
| Lihle/Servair | R151.4m | – | R151.4m |
| Air Lease Corporation | R108.8m | R111.8m | R111.8m |
| Stellar Aircraft Holding 2 | R57m | R107.1m | R107.1m |
The creditor listed as “Lihle/Serevair” (no doubt Servair, an aviation services company) has a claim of R151 million, of which the company has no record.
The R790 million Comair claim is widely known.
A R1.7 billion claim from one Robert Watson stems from damages claims made by defunct airline Sun Air more than a decade ago. Claims by certain of the Sun Air shareholders were ceded to Watson.
Only 89 claims (of the more than 1 000) are listed as “verified and approved” in the business rescue plan. These are mostly small, with the largest running into single-digit millions. The practitioners say R600 million will be made available to pay concurrent creditors, once the plan is implemented. This will be paid over a three-year period and represents 7.5 cents in the rand.
Leasing companies will receive a total of R1.7 billion, “equivalent to six months’ rental payments less any letters of credit or cash deposits held”. This, too, will be paid over a three-year period.
COMMENTS 31
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What a joke.
Vote 60
Yes, it is a joke. With the track record reported now, how dare the SA Government even contemplate saving the old airline or try starting a new one. There is no expertise now, nor will there be any to support any suggestion like a new airline.
Vote 44
No. He was in active politics during most of the years of THEANC shenanigans.
Vote 9
What a joke.
Vote 50
What a joke.
Vote 30
Talk about trading in insolvent circumstances.
The directors have a ton to answer for, as have the shareholders who have been totally reckless in running SAA into the ground.
But okay, at least they’re not alone. All other SOE’s are in the same boat.
Our great developmental state.
Vote 76
Would it not be far cheaper to scuttle SAA and throw every month a couple of millions in the ANC cronies direction? This would save them the bother in future to pretend running an airline and by doing so load up the tax payers with infinite higher costs.
Vote 99
Absolute madness, I guess its unsuprising given Nr1’s ex running the show, mind you Nr1 couldnt even manage his own chequebook and had to get his (terminally ill) golf buddy to bail him out.
Vote 54
Gents, surely goign to various casino table options would make more sense for these millions at risk ?!
Vote 34
I will stick to it till proven wrong: the whole current government has not a single day’s long term insight in this country’s future by keeping saa semi-afloat with taxpayer’s money – saa is a still born entity that in a decompose state but the anc tries to raise it out of the death.
edcon (private sector) gives notice to 10 000 employees of retrenchment, but the anc does not have the guts to retrench the cadre employed friends and close down a soe that will not in the next 100 years make a profit. if other big airways in the rest of the world are financially suffering and scaling down, how can the minute saa have a hope in hell that they will turn into a profitable entity, especially during and after covert19????
Vote 73
Surely leasing debt is much more than the R1.7bn in the last par if you look at the list?
Vote 22
Whoever doubted that corruption kills countries and people’s lives should think again.
Wasn’t CR in parliament all the time.? What did he say or do?
Vote 74
No, he only came back to active politics more recently. He was however a member of the ANC national executive council all along!
Vote 9
It has been said, he, CR will always vote with majority – therefore whatever he does or says carries no substance. Empty shirt!
Vote 18
Talking about a further R10 billion being put in, retrenching everyone other than 1000. Cost of each job? A paltry R10 million!
Rather go the straight liquidation route. Secured creds get their security only. Guaranteed Creds get paid by the taxpayers ( but we always knew that) Pref creditors get what is preferred and the concurrent creditors get nothing. (The proposed estimated 7.5 cents is almost as good as nothing!)
New airline can emerge at bargain aircraft acquisition costs following the huge auctions that will take place. Employ the pick of the bunch of staff that will be available. Do new deals throughout. Use the Comair guys and the best features of each of the existing crippled airlines. Don’t try to rescue a lame duck with an expensive bandage.
Or, is there another plan? Maybe VBS Bank can be rescued by giving them the new aircraft leases?,
Vote 31
What is termed in aviation as a spiral dive, result: terminal.
Vote 29
Our banks are complicit in the looting of the taxpayer.
Vote 50
absolutely….another example is giving car finance right left and center to government to by unnecessary expensive cars for the cadres.
Vote 22
On a recent repatriation flight from Dubai a SAA plane had to fly via Doha to refuel. One suspects their credit lines in Dubai are shot.
Vote 25
I was under the impression it’s illegal to trade knowing full-well you’re insolvent? Could that explain the 3 year delay in audited FS? To be able to claim ignorance? And it was Gordhan – no one else – who arranged time and again that the tabling of FS in parliament gets postponed. Even some years back when Dudu was chairman, did Gordhan grant postponements of FS to be tabled in Parliament over and over again. Total abuse of position and power!
Vote 53
please please PLEASE!!! fellow countrymen & country ladies & all of our 61 million plus inhabitants….. we just require the simple hard copy printouts of the day-to-day bank ACCOUNT STATEMENTS AS WELL … IN other words the entries of the simple plain story of the entries as debits & credits…. if the people in charge don’t understand THAT…. print the statements on a color printer…. to assist with the interpretation of what is RED amounts & WHAT is BLACK amounts…. AND PUBLISH these couple of pages… To see the bottom lines!!! & let it come up every Thursday night on the various news channels…. AND Bloomberg will also pick it UP…. and the penny will drop… hopefully later… with our gullible Ministers & Partners in CHARGE…. Happy
Vote 19
There’s money for printing
..you’ve heard about the inflated wage bill?
Vote 15
This is madness.
Pravin Gordhan and the entire board should be arrested and charged with reckless trading.
Vote 44
Hilton , Can you pls investigate and publish and in depth article “WHY SHOULD SA HAVE AN AIRWAYS RUN BY GOVERMENT?” The pros and cons.
Vote 21
If this were an actual aeroplane – the debris and bodies would be strewn across a mountainside
Vote 15
Only one viable solution.
Only deal with them on a strictly pay in advance basis for services and goods provided like some kind of COD system.
If not then stop using them and stop dealing with them.
Vote 13
The article shows just how deep the rot is/was at SAA. Sadly, P. Gordhan has now lost all credibility. He once was held in high regard as a man of integrity. What happened? Why is he so intent on reviving SAA? Is he being blackmailed by other cadres? Are there skeletons in his cupboard also? Maybe we need old Zupta783 to comment.
Vote 29
The headline is misleading. It should read:
How much South African taxpayers owe the banks and other creditors on behalf of SAA
If we are having to pick up the bill, at least have the decency to acknowledge as much.
Vote 33
Very informative, thx Hilton!
Is SOE, Acsa, with 14 claims, one of the companies looking at 7.5c in the rand IF there’s money and over 3 years? Isn’t the idea that if there’s NOT money, the contingency creditors receive equity?
Regarding debt to Acsa – does Acsa then get a stake in SAA in 3 years? It sounds a bit too close for comfort….???
And those claims with seemingly inflated amounts….brrr
Of course they won’t pay Comair – why bother with competition?
Excellent article, very informative.
Vote 24
The SAA debt dwarfs the VBS “bank robbery” by cadres.
And Eskom dwarfs SAA.
“How long” can this looting go on until you don’t have a country left? (…RW Johnson would’ve asked)
Govt cannot simply start a “new” airline, and conveniently forget about the “old” airline’s debt. Is has to be REPAID! Full stop!
Banks and creditors need to be repaid.
But say creditors gets paid only get a few cents in the Rand (and take a haircut for the rest) then what is the future chances that commercial banks will loan funds again to any SOE anymore?
Vote 10
Actually it’s the fault of the banks and suppliers for allowing any one of their accounts with SAA to go into debt of more than R25m at a maximum.
If they had closed the account and called up the debt none of this would have escalated as it has.
Would anyone of the commentators here be allowed or allow debt to escalate to these levels in their personal business dealings? Not in a million years, so why was SAA given this free pass?
Vote 22
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