The business rescue of SAA has been further prolonged after a dispute broke out between the government and the consortium of banks to which SAA owes money, on the eve of the finalisation of the rescue plan.
A guarantee confirmation letter to lenders stating when and how they will be repaid is one of the conditions necessary for the success of the rescue and was not met by the close of business on Thursday.
The Treasury said that the letter was “following internal due diligence processes”.
This means that another creditor’s meeting will be held on Friday, extending the process well into its seventh month. A further extension to provide the letter is likely to be provided.
Before the start of the rescue, a consortium of domestic banks were owed about R9.2bn plus interest, which is long overdue for repayment. When the business rescue process started banks provided a further R2bn and the Development Bank of Southern Africa (DBSA) provided R3.5bn. The Treasury undertook to repay the latter two amounts by July 31.
The legacy debt has been pencilled into the medium-term budget policy statement for repayment by the Treasury over the next few years, beginning in 2020/2021. But lenders want a guarantee confirmation letter of when this will be repaid.
In a letter to affected parties on Thursday, Les Matuson and Siviwe Dongwana said that on Wednesday a dispute had arisen between the lenders and government over the form of the letter.
“Engagements began between the lenders, the company and government in relation to the final form of the letter, which was agreed on in the evening of 22 July 2020 ... (However) the guarantee confirmation letter has not yet been provided to the company therefore we are required to convene the meeting as set out in the business rescue plan,” they said.
The business rescue practitioners also told affected parties that in their view they were satisfied that the condition precedent that government “provide the requisite funding” to restart SAA and settle various obligations, including to employees, has been met. Last week, the ministers of public enterprises and finance provided Matuson and Dongwana with a letter committing to “the mobilisation” of funds for SAA. The plan requires R10.1bn in short, medium and long term funding.
However, since the letter was provided, Finance Minister Tito Mboweni has made it clear that the R10.1bn will not be paid by the fiscus but that government will seek to mobilise it elsewhere, for instance, from investors or through a share offering.
While Matuson and Dongwana say that the funding condition has been met, there is no clarity on where the money will come from. Speculation was rife in the market on Thursday that the negotiations with banks were linked to a plan to delay repayment in order to put treasury funds into SAA. This could not be confirmed. The department of public enterprises did not respond to a request for comment.
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