Home South African Last hurdle to SAA business rescue plan implementation cleared

Last hurdle to SAA business rescue plan implementation cleared

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CAPE TOWN, July 28 (ANA) – All conditions for the implementation of a rescue plan for South African Airways have been met after the government amended a guarantee confirmation letter to creditors, a spokeswoman for the business rescue team said on Tuesday.

A meeting of the national carrier’s creditors scheduled for Thursday, in case a revised guarantee confirmation letter was not forthcoming, had therefore been cancelled, Louise Brugman said. 

“There will be no meeting on July 30 … and the plan has become unconditional and has come into operation,” she said in a statement.

The problem with the letter was the absence of a guarantee that payment on outstanding, government guaranteed debt would be transferred into a legal entity called a receivership. The receivership will then in turn disburse the money to the lenders, which include commercial banks and the Development Bank of Southern Africa.

The government has allocated R16.4 billion (US$989.7 million) to meet debt obligations the loss-making national carrier is unable to pay. It went into business rescue in December in the wake of a crippling strike over wage demands.

The government has resisted calls to liquidate SAA, despite the turmoil in the global airline industry and having had to plough billions into the company in the past decade to keep it operational. Public Enterprises Minister Pravin Gordhan has been a strong proponent of finding strategic equity partners to help run a revamped airline.

Under the business rescue plan, the state will put up another R10.1 billion to pay for severance packages for 2,700 of the airline’s staff and to help it resume operations.

Business rescue practitioners Les Matuson and Siviwe Dongwana said they were finalising technicalities before filing a notice of implementation of the plan, which was approved by an overwhelming majority of creditors earlier this month.

“We 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 71 of 2008, as amended,” they said.

South Africa’s main opposition Democratic Alliance said questions remained about where the department of public enterprises would obtain the funding required by the airline under the plan.

The party this month went to court to seek an interdict preventing Finance Minister Tito Mboweni from using emergency funding from the National Revenue Fund.

Mboweni clarified in court papers that the government in its letters to creditors had committed to mobilising the funding, rather than providing it, stressing that the wording was important. He said he did not intend resorting to the National Revenue Fund.

– African News Agency (ANA)

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