The South African government has agreed to pay approximately ZAR20 billion ($1.15 billion) to clear the debts of South African Airways (SAA) and restructure the airline under a business rescue plan proposed by its administrators.
A draft plan of the business rescue seen by Airfinance Journal states that the government has agreed to inject ZAR2 billion for working capital requirements and another ZAR2 billion to fund employee layoffs.
In addition, the government will allocate ZAR16.4 billion to pay off existing creditors.
The biggest creditor is Nedbank, which is owed ZAR2.78 billion from loans, excluding interest, followed by ZAR2.33 billion owed to ABSA, ZAR1.3 billion owed to Standard Bank, and ZAR1.27 billion owed to Investec.
In addition, under a ZAR2 billion revolving credit facility (RCF) extended to SAA in December 2019, Nedbank is owed ZAR649 million, Investec ZAR295 million, FirstRand ZAR95 million, ABSA ZAR557 million and Standard Bank ZAR305 million.
Development Bank of Southern Africa is owed ZAR3.5 billion for a separate facility.
A further ZAR600 million will be paid to general concurrent creditors.
The administrators envisage repaying ZAR12.7 billion of debt over the next three years.
The payments are part of a proposal drafted by Les Matuson and Siviwe Dongwana that would involve significant job cuts, route reductions and a reduction in the airline’s fleet.
A new holding company would be created to manage the South African government’s aviation businesses, including SAA, Mango and SAA Technical, to eliminate “individual governance and operational structures”.
SAA would offer current employees jobs under “revised terms and conditions of employment” in the new holding company. Those who refused to accept would be made redundant.
The document shows that the administrators have contacted three parties as part of efforts to find a strategic equity partner for the airline. These are considering “various arrangements that they might be interested in”.
One of the parties is not seeking to become an equity partner; it is however interested in forming an alliance agreement which would provide SAA with increased passenger volumes by being included in the network, the administrators note.
Failure to agree on the business rescue plan will result in liquidation of the airline, the administrators warn.
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