You can keep flying SAA thanks to R3.5bn in funding

By Lameez Omarjee for Fin24

The Development Bank of Southern Africa has committed R3.5bn to SAA, business rescue practitioners have confirmed.

In a statement issued on Tuesday afternoon, business rescue practitioners Les Matuson and Siviwe Dongwana said stakeholders can continue flying SAA now that required funding has been secured.

“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,” they said.

Earlier on Tuesday Bloomberg reported that government may have received funding from DBSA, which would be government guaranteed. Treasury, the DBSA and SAA would not comment at the time.

When SAA was placed into business rescue, by order of President Cyril Ramaphosa, in December 2019 – both government and creditors committed to jointly provide R4bn.

Local commercial banks had provided R2bn in post-commencement financing – in addition to existing exposures to SAA. However, by mid-January government still had not been able to keep its end of the bargain.

In recent weeks government has managed to obtain the balance required to meet short term liquidity requirements of the airline until the business rescue plan is published. Fin24 understands that the plan will be finalised in February.

“Discussions held with financial institutions have been fruitful with the Development Bank of Southern Africa offering to provide the next tranche of PCF, for a total amount of R3.5bn, with an immediate draw-down of R2bn.

“Furthermore, funding for the restructuring phase after the plan is adopted is being considered by potential funders,” said the business rescue practitioners.

The airline has been facing a liquidity crisis and earlier this month, had to cancel flights in order to save cash.

Following speculation that the airline was going to fold, the Department of Public Enterprises issued a statement on Sunday January 19, 2020 assuring the public of its commitment to saving the airline.

“We are determined to contribute to the Business Rescue process so that we could minimise job losses and give birth to a rejuvenated SAA that all South Africans could be proud of. Collective effort is needed to make SAA as a premier African airline and Star Alliance member,” the Department of Public Enterprises (DPE) said at the time.

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