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SAA seeks funding as state wavers on aid

Airline has reportedly approached Standard Bank, Investec, Absa, Nedbank and RMB.
Minister of Public Enterprises Pravin Gordhan. Image: Citizen

South African Airways is in talks with lenders including Standard Bank Group and Investec about funds to alleviate a cash crunch brought on by persistent losses and a week-long strike, according to people familiar with the matter.

Negotiations are also taking place with Absa Group, Nedbank Group and FirstRand’s Rand Merchant Bank, said the two people who asked not to be identified as the discussions are private. The state-owned company aims to raise enough money to pay salaries, fuel its planes and cover other costs until March 2020, they said.

The banks all declined to comment.

Read: SAA lost over R10.4bn in past 2 years – documents

SAA’s bid to obtain more loans isn’t assured, even if it secures state backing. When the carrier tried to raise the money needed to ensure continued operations for at least 12 months and to finalise financial statements for fiscal 2018, “lenders were not willing to extend facilities even on the strength of government guarantees,” it said in a document presented to lawmakers on Monday.

“The hesitant and inconsistent approach to addressing the recapitalisation of SAA has made it difficult for the board to conclude on its going-concern status,” the carrier said.

SAA last made a profit in 2011 and has failed to implement numerous turnaround plans. The carrier delayed publication of its financial statements for the year through March until its status as a going concern is assured — a contingency that will hinge on it securing more working capital.

The airline has received R57 billion in bailouts since 1994 and Finance Minister Tito Mboweni has been reluctant to give it more money or provide guarantees to enable it to raise more debt, saying it isn’t viable and should be shut down. Public Enterprises Minister Pravin Gordhan has said SAA will keep flying and a “radical restructuring” will be undertaken to ensure its financial and operational sustainability.

Problem unresolved

SAA’s acting Chairwoman Thandeka Mgoduso confirmed the carrier’s executive committee is engaging unidentified lenders, the Treasury and Department of Public Enterprises to secure the 2 billion rand it needs to pay November salaries and other creditors. The matter remains unresolved, she said in a Nov. 25 letter to parliament’s public accounts committee.

Gordhan’s spokesman Sam Mkokeli, and Mboweni’s spokeswoman, Mashudu Masutha-Rammutle, didn’t answer calls to their mobile phones seeking comment.

The South African Cabin Crew Association and the National Union of Metalworkers of South Africa, which together represent more than 3,000 SAA staff and staged a wage strike last month that forced the cancellation of a number of flights, said that they are not responsible for SAA’s financial woes.

“Airline management was aware as early as June this year that there was not enough money for operational costs from November onward,” the unions said in an emailed statement.

They accused Gordhan and Mboweni of undermining SAA’s brand and said that unless they took decisive steps to save the airline they would join a lawsuit filed by labor union Solidarity to have it placed in business rescue, a local form of bankruptcy protection.

© 2019 Bloomberg L.P.

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COMMENTS   32

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Ag boet. Don’t worry about it. It is nobody’s fault.
Alles sal reg kom.

As the ex speaker of the house said, “The ANC views things differently.”

Try online; there’s a host of microlenders…
And Gordhan might have a rich uncle somewhere in his family…
If MY bank gets involved in this mess it’s time for ratings agents to give it junk status!

Question Louise? How did PG’s uncle get rich?

He is a card carrying member of the ANC. Nuff said!

I always understood he is in the Furniture Business. My source is the EFF so I cannot verify the accuracy.

why not just approach Dudu Myeni or Zuma for the money, after all???

The company is behind with their accounts, is insolvent, thumbs it’s nose at Parliament, and has the temerity to approach the banks for funding shows how out of control things are.

In the Rainbow nation all that ticks the boxes for a huge loan/gift, generosity of the faithful 7%.

Imagine being approached for a loan by an unkempt man who has a history of mismanaging his finances and a proven record of losing over TEN BILLION RAND in just the last 2 years, never mind more in the past. Furthermore, he doesn’t have any kind of coherent plan to show why he will not lose many more billions of the money he wants you to lend him. Would you lend him a couple of billion rand? No, I thought not.

Brilliant!!!!

not even financials to show you ! you couldn’t make this up….

Yes, it is finally near to peak transformation.

Pravin will tell the banks it’s their “collective duty” like he told SA consumers it’s their collective duty to fly SAA.
He is getting too old for this job!

If there is any suspicion of SAA currently trading in insolvent circumstances, any new lending would be reckless. Any security taken could and should be overturned as it would be prejudicing one creditor over another. The financial statements, even in draft format should be available to lenders before any new loans are given. Also, the current directors, knowing that existing creditors would be prejudiced by new debt being taken on should be held accountable in their personal capacities.

Draft statements are not enough. If a corner cafe is late with AFS or tax returns they get fined. So SAA must produce audited financial statements that are now long overdue-no excuses. Also the Board is now liable for any debts of SAA as they are trading under insolvent circumstances. If any debt recovery process starts the directors become co-dependents and will need to be sequestrated if they do not pay up.

The state has managed this with stunning incompetence. But that’s how Eskom and the other SOEs have been managed too.

Now when the stable doors are closed and the horse has bolted, they want to do a restructure.

Too little, too late. So now it’s up to customers to stop flying SAA, and the banks to stop lending no matter what, to close it down. Let’s hope they do this.

Because the govt is paralysed in inaction and clearly is incapable of running anything anywhere other than into the ground.

The dilemma for the government is: How do we BAILOUT SAA (once again) without the ratings agencies finding out.

They will all decline. Then they will turn to the taxpayer for (another) bailout. 5 minutes later we will be officially downgraded to junk by Moodys. The writing is on the wall – has been since 1994.

Any banker lending money to SAA should be charged with reckless lending.

Hence the ” desire” for prescribed assets.

Allowing this monument to ANC incompetence, corruption cadre deployment, arrogance etc. to fail will be the best thing for this country and its economy.

If the banks lend them money there is no difference between them and Government..The writing is on the wall! If Government is not bailing bailing them out, how ludicrous it will be for the Private Sector to do so ..All they are doing is kicking the can down the road..The inevitable is nigh..Throwing good money after bad..It’s time for the ANC to realize that if they want to save SOE’s, get the Private Sector involved. If the SAA was my company and i ran it like they do, i would have been declared bankrupt 10 years ago with no business..I don’t have a Daddy to bail me out…As an entrepreneur I think on my feet and i don’t steal from my business..Mind you, i’m not a civil servant who gets paid to work,whether I’m there or not.. I WORK to earn my keep, whilst my tax money goes to those exact same SOE’s to keep them floating..Let the Airline sink or sell it to the Englishman, he’ll show you what a turnaround strategy is all about

Bet you funding by Friday. They don’t give a darn about Moodys.

There are plane loads of parasites that need business class for family and friends all over the world this December.

Wonder if the Guptas are interested in helping?

This REALLY needs to happen – SAA needs to go down, unfortunately. It must not be saved by an equity partner, it needs to go down. People need to see that if we don’t work together towards the bigger picture, then things will go down in flames. There must be no restructuring, it needs to go down. SAA must literally just disappear and the jobs along with it, harsh as that may sound. It is the only way to start setting expectations straight.

Agree. If my bank , who is mentioned, helps I close my account

Alert – reckless lending loading

My money is on First Rand approving the loan

SAA must go into liquidation-The staff, together with Numsa and other organisations, cannot expect the Taxpayer to bail out a failure like this. Here is a question: if i have a private Company and i do not make a profit, will the Government ( by extension the Taxpayer) help me too?

the answer is no. SAA must go, we do not need them

There is a guy in Nigeria who will be able to loan SAA $1bn … he just needs a downpayment of $1m in order to get the funds released …. probably SAA’s best chance …

The PIC is the lender of last resort. Let them approve this loan, and get on with it. Hell, give them enough money to pay for 10 years worth of expenses. We know they won’t break even by then. Why waste time?

Moody’s must be scratching their heads and saying “we’ve given these idiots so many opportunities to sort things out but they just seem hell bent on self destruction for some strange reason. Where’s that DOWNGRADE stamp ?”

End of comments.

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