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|
|Standard Bank||Structured loans||R1.06bn|
|Nedbank||Subordinated long term loan||R784.7m|
|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|
(part of FirstRand)
* 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|
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|
|Avolon Aerospace AOE158||–||R1.77bn||R1.77bn|
|Pembroke Aircraft Leasing 4||–||R772.6m||R772.6m|
|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|
|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.