Aside from mounting a financial rescue operation at Eskom, the government will give another R1 billion to SAA before the end of the current financial year towards paying off the airline’s historical debt.
(Delwyn Verasamy/M&G)
The government has given SAA R9.3-billion towards paying the R16.4-billion it owes creditors. The debt includes interest on historical debt and additional funds that banks lent to SAA to ensure its operations continued while it is under business rescue.
The payment of the airline’s debt is part of the government’s commitment to source funding for SAA’s business rescue plan, which was adopted by creditors in July.
Though the balance of R7.1-billion owed to creditors is not yet available, the government has said it is committed “to making this funding available during next week”, according to SAA’s business rescue practitioners Les Matuson and Siviwe Dongwana.
The implementation of the rescue plan has been plagued by delays because of uncertainty about how its funding requirements would be met. SAA was placed under business rescue in December last year.
In a letter to creditors on Wednesday, Matuson and Dongwana said there had been ongoing discussions with the government regarding funding the rescue plan.
At least R10.1-billion is needed for the payment of more than 3 000 voluntary severance packages for employees, restarting commercial flights by January next year and reducing the airline’s fleet.
Matuson and Dongwana have already terminated 33 out of 40 aircraft lease agreements. The termination of the remaining seven leases is expected to be finalised by the end of September, according to the rescue practitioners’ letter to creditors.
“The importance of this action item is to ensure that the company does not have overly
burdensome contracts that are not suitable for the company during the implementation of the plan or thereafter,” the letter reads.
In the letter Matuson and Dongwana note their concerns about adequate funds to continue operations. The funds available are “near depletion, thus the availability of the requisite funding to the company during the course of next week will determine whether the business rescue proceedings can continue”.
Without funding for the rescue plan, SAA would have to be liquidated, and all monies owed to creditors would have to be paid immediately, they said.
There is still no clarity on where and how the government will source the R10.1-billion in new money to fund the remainder of the rescue plan.
Matuson and Dongwana are to give an update on government funding on September 17. Should the rescue practitioners be dissatisfied with the progress made in sourcing the funding, a meeting of creditors and other affected people will be convened on September 18 to chart what happens next.
SAA aircraft have been grounded since March, when the first cases of Covid-19 in South Africa were reported. Repatriation flights began in April.