News broke late on Wednesday that South African Airways (SAA) will be placed in urgent voluntary business rescue.
The Citizen was aware of this development and has been awaiting official confirmation. However, TimesLIVE thenreported that President Cyril Ramaphosa ordered this be done in a leaked official letter, signed by secretary of the cabinet Cassius Lubisi (see below to read), due to the “dire situation” at the national airline.
The president sees this as “the only viable route open to the government to avoid an uncontrolled implosion” of SAA.
By being placed in business rescue, this would save the airline from being liquidated by its creditors.
“We remain seized with the SAA crisis and will keep members of the executive informed at all material times,” the letter reportedly reads.
Presidency spokesperson Khusela Diko confirmed that the letter is legitimate and was meant only for cabinet members and their deputies. She expressed concern that the news had entered the public domain in this way.
Financial statements showing the true state of affairs at SAA, which the auditor-general has not even seen, will need to be made available, it was reported last week.
Moneyweb reported that the attempt by trade union Solidarity to save SAA by applying for it to be placed in business rescue would most probably ultimately fail to prevent the liquidation of the indebted airline.
The earlier proposed restructuring of SAA has been abandoned.
The Citizen understands that both the SA Cabin Crew Association and the National Union of Metalworkers of SA have been in talks with Solidarity to join its application to force the business rescue.
“The provisions in the legislation dealing with business rescue, Chapter 6 of the Companies Act No 71 of 2008, indicates that a court would probably refuse to allow business rescue and opt to liquidate SAA,” Adriaan Kruger wrote.
“The ugly truth is that it is far too late to save SAA through a process of business rescue. A team of business rescue practitioners should have been called in years ago,” he added.
Earlier, Bloomberg reported that the airline was in talks with lenders including Standard Bank Group, Investec, Absa Group, Nedbank Group and FirstRand’s Rand Merchant Bank for funding which could help the struggling state-owned carrier after the recent crippling week-long strike.
Two anonymous sources told the publication the discussions were private, and all banks and financial providers involved declined to comment.
The airline needs help to pay salaries, purchase fuel and cover costs up until March 2020, and needs about R2 billion.
It also promised to pay backdated salary increases as part of the negotiations that led to the end of the strike, saying at the time that government would find these funds.
The leaked cabinet letter.
(Compiled by Daniel Friedman and Charles Cilliers)
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