R3.5bn to aid SAA business rescue

Alex Beltyukov via Wikimedia Commons

"Discussions held with financial institutions have been fruitful with the Development Bank of Southern Africa offering to provide the next tranche of PCF [post commencement funding], for a total amount of R3.5bn, with an immediate draw-down of R2bn," the national carrier confirmed on Tuesday.

SAA’s business rescue practitioners, supported by the Departments of Public Enterprises (DPE) and National Treasury, were successful in obtaining the balance of the PCF required to meet the short term liquidity requirements of the airline for the period until the business rescue plan is published and adopted.

The plan is required in terms of Section 150 of the Companies Act and is the responsibility of the business rescue practitioners.

The advancement of the funds comes on the back of the business rescue process which began on 5 December 2019.

Following this, local commercial banks provided the initial PCF of R2bn in addition to the existing exposures to SAA.

Meanwhile, funding for the restructuring phase after the plan is adopted is being considered by potential funders.

Progress on reconstructing SAA

"The restructuring of SAA will provide an opportunity to develop a sustainable, competitive and efficient airline with a strategic equity partner remaining the objective of government through this exercise and will result in the preservation of jobs wherever possible," said the national carrier.

SAA is a key strategic asset which needs to be positioned to provide reliable connectivity to markets within South Africa, the African continent as well as servicing selected international routes.

"Stakeholders of the airline should now have comfort that the rescue process is on a significantly sounder footing, and that passengers and travel agencies and airline partners may continue to book air travel on SAA with confidence," it said.

Announcing the decision to place the airline under business rescue in December 2019, Public Enterprises Minister Pravin Gordhan said government’s intention to introduce a radical restructuring process at the airline is aimed at ensuring its financial and operational sustainability.

"Our desire is that the restructured airline will mark the beginning of a new era in South African aviation and must be able to bring in millions more tourists into SA; help create more jobs in tourism and related sectors of the economy and work with other African airlines to underpin and service the integration of African markets and improve dramatically intra-African trade and travel," Gordhan said at the time.

He said it is important that the reliance on government finances be reduced as soon as possible and to minimise disruption to SAA services, customers, staff and other stakeholders.