SAA rescue not yet out of the woods as BRPs schedule creditors’ meeting

The practitioners tasked with rescuing South African Airways (SAA) have scheduled another meeting of creditors after the government failed to provide a “satisfactory” letter of confirmation regarding the loans provided by guaranteed lenders.

These lenders are owed R16.4 billion by government. This is money that was extended to SAA in the form of credit prior to the airline being placed under business rescue as well as the R5.5 billion that is needed for post-commencement funding (PCF).

In the February budget, Minister of Finance Tito Mboweni set aside the full amount to pay the guaranteed debt and interest. 

Creditors’ meeting 

In a notice to affected persons on Thursday, rescue practitioner Siviwe Dongwana said all the conditions that had to be met by July 22 in order for the plan to be fully adopted and implementable had been fulfilled, except for the condition related to a guarantee confirmation letter required by the lenders. 

The government was provided with the letter to sign off. 

The lenders include a number of South Africa’s private banks as well as the Development Bank of Southern Africa (DBSA). 

“On 22 July 2020, the lenders expressed their dissatisfaction with the form of the letter and engagements began between the lenders, the company and government in relation to the final form of the letter,” said the BRPs, adding that the revised letter was then agreed on the same day. 

However, the government has not yet provided the final letter to SAA and this has triggered a clause to convene a creditors’ meeting where an amendment to the rescue plan will be made.

Read: Why did PwC not identify corruption at SAA?

The clause specifically states that the government should provide “confirmation satisfactory to the DBSA, PCF bank lenders and the pre-commencement lenders that the guarantees issued to them in respect of the pre-commencement claims and the PCF provided by them to the company shall continue in full force and effect until the lender claims are discharged in full”.

At the meeting, creditors will consider extending the deadline for the conditions precedent to be met by July 27, failing which the rescue plan will be considered “unimplementable”, necessitating a follow-up meeting of creditors on July 30 for further amendments.

Should amendments not be made at the July 30 meeting, the rescue practitioners will discharge the rescue process. 

The BRPs said they are hopeful they will receive the signed guarantee confirmation letter prior to the meeting scheduled for July 24.