South African Airways’ (SAA’s) business rescue plan has come into operation, after an outstanding condition related to the guarantees of lenders was fulfilled on Monday.
In an update on Tuesday, SAA business rescue practitioners Siviwe Dongwana and Les Matuson informed affected persons that the outstanding letter from government – confirming that lenders who are owed guaranteed debt of R16.4 billion would receive their payments – had been finalised.
This means that all the conditions that had to be concluded prior to the airline’s restructuring process have now been completed.
Initially, the rescue plan had set a deadline of July 22 for all the conditions precedent to be completed, however discussions between government and the lenders on the terms of the guarantee letter were still ongoing when the deadline arrived.
Treasury had already set aside R16.4 billion for guaranteed debt and interest to repay loans extended to SAA by a group of banks and the Development Bank of Southern Africa before and after business rescue commenced.
In a creditor’s meeting on Thursday – where 95% of the creditors voted in favour of extending the deadline while negotiations were ongoing – the BRPs stressed that neither government nor lenders could be faulted for the delay, as the process was not familiar to either party.
When SAA went under business rescue in December it became the first state-owned entity to do so. The BRPs said the legal framework that they were trying to put together was a “novel” one and “required a little bit of an adjustment in the way of thinking and doing things.”
The BRPs said they are “currently attending to and finalising the remaining outstanding administrative issues before filing a notice of substantial implementation” in terms of section 152 (8) of the Companies Act”.
Once this notice is filed, SAA will no longer be in business rescue and the rescue plan will remain in effect, where the company and creditors will be bound by its provisions.
SAA directors will also regain control of the operations of the business.
SAA’s chief commercial officer Philip Saunders was appointed as the interim chief executive for SAA; he’ll be responsible for heading up its R10.3 billion restructure.
The rescue process will involve issuing R2.2 billion severance packages to just over 2 700 employees, running the domestic operations of SAA until January 2021 and thereafter gradually expanding the service and workforce for international and regional services under level one of lockdown.
Government has committed to mobilising the money needed for the rescue from a variety of sources, including strategic partners and institutional investors such as pensions funds.