SAA after Business rescue

[snoopy]

Re the plan approval - creditors and any holders of a voting interest must hold a voting meeting on considering the proposed plan, within 10 business days of the publication of the business rescue plan. So this means they need to finalize the way forward within less than 2 months. But government is not the only entity who has a vote on the plan - SAAs creditors do as well, and there are many.

No person appointed as a director of SAA can make any decision on behalf of SAA without it being approved by the BRP first, once BR is approved for SAA.

[snoopy]

And here is the qualification criteria for appointment as a business rescue practitioner

They're not allowed to have any personal interest in SAA, or any existing relationship with SAA, that may lead to bias or cause a conflict of interest.

https://www.saica.co.za/Portals/0/Techn ... ioners.pdf

[heisan]

Re the plan approval - creditors and any holders of a voting interest must hold a voting meeting on considering the proposed plan, within 10 business days of the publication of the business rescue plan. So this means they need to finalize the way forward within less than 2 months. But government is not the only entity who has a vote on the plan - SAAs creditors do as well, and there are many.

No person appointed as a director of SAA can make any decision on behalf of SAA without it being approved by the BRP first, once BR is approved for SAA.

I think it all depends on the exact wording of the government guarantees, and how the individual creditors choose to play it. It may well be that the government is forced to pay out the guarantees, effectively buying back all the debt. At which point the government will be by far the biggest creditor.

[ZX357]

Perfect opportunity for a willing investor/partner to step in and run the airline properly

Let's see if Branson takes the bait

More likely an airline, my money is on Lufthansa as they were recently willing to purchase a 25 percent stake in Namibian Airways...

[rainier]

Wow, 2 Billion for SAA in a "fiscally neutral manner". Not a "bailout".
So, can we give Eskom another couple of 100 billion in a "fiscally neutral manner" as well.

How does this work, I would have thought "fiscally neutral manner" would involve money growing on trees.

Is this a spin or what ?

Any boffins out there that can explain this ? I would like to give myself a few hundred million, "fiscally neutral" of course. Need to find out how that is done. Clearly I have no idea.

[B.hawker]

I don't see business rescue helping much in this instance, certainly SAA will not emerge the other end intact and viable as the SAA we knew in the distant past....there's no value in the business - just bad debt, a legacy of corruption and the distinct smell of a dead carcass in the air.

Business Rescue will protect the Company from its creditors at least until a logical waterfall of those creditors is established.... and an exit strategy formulated, other than that, the only winners here will be the attorneys, the BRP and anyone related to consulting into/drafting and executing the exit strategy.

Go to dudu SAA...goto dudu...

Its really sad....

[snoopy]

Wow, 2 Billion for SAA in a "fiscally neutral manner". Not a "bailout".
So, can we give Eskom another couple of 100 billion in a "fiscally neutral manner" as well.

How does this work, I would have thought "fiscally neutral manner" would involve money growing on trees.

Is this a spin or what ?

Any boffins out there that can explain this ? I would like to give myself a few hundred million, "fiscally neutral" of course. Need to find out how that is done. Clearly I have no idea.

The tax payer, can still "vote" with their wallet, in where they make their airline ticket spend, for personal and business use, over the next 3 months.

Existing lenders would provide SAA 2 billion rand of loans guaranteed by government and repayable out of future budget appropriations. Government would provide 2 billion rand in a “fiscally neutral manner

That's the only power tax payers have to get this burden off their backs.

[rainier]

Its really sad....

Agreed. This is (soon was ?) one of the World's oldest airlines. I hope those that were the cause of this will one day face some form of justice. Even just for the sake of the many loyal employees from the cleaners to the Captains. I sincerely hope all these good people will find alternative employment and I hope that something workable may rise from the ashes (I'm an optimist).
This was not necessary.
Yes. Sad.

[snoopy]

The national airline of Switzerland which was founded 1931 filed bankruptcy in 2002 - it won't be the first or last airline to go the same way. There is a cost to corruption and mismanagement. Often it kills the brand. And whats been going on at SAA for 10 years - is really not doing Brand SA any good.

Does it really deserve to be a national carrier? How proud are tax payers of it really?

Either way - if this last round doesnt work, it pretty much a slam dunk case. Swissair also had several politicians among Swissair's directors before it folded.

The Swiss flag this flies - but it flies on Swiss International Air Lines today.

[Mrb13676]

And here is the qualification criteria for appointment as a business rescue practitioner

They're not allowed to have any personal interest in SAA, or any existing relationship with SAA, that may lead to bias or cause a conflict of interest.

https://www.saica.co.za/Portals/0/Techn ... ioners.pdf

What happened with Aurora gold mine - wasn't that business rescue? Where Khulubuse and co looted it as the business rescue practitioners?
Or was that another process.. what I'm worried about is the same happening to SAA....

[snoopy]

What money is there left to loot at SAA? If they qualify for BR - they dont have money to last for more than 6 months, if they had such money , they wont qualify for BR at all.

Besides, they lease (from creditors) most of what is perceived as their "assets". For BR it has to be proven that SAA has a fair chance of recovery. And SAA's creditors have to agree with that.

As a footnote - TAKE NOTE we are talking about a state "business" which applied tax payer money, and was still unable to stay afloat for 10 years, which is now finally in financial distress as a result of the treasury saying - enough is enough - apply your mind to what that means in bigger terms.

The tax payer money SAA spent , cant be used for anything in SA society anymore - which is what that reserve was intended for.

And if SAA hasn't filed financials for the past two years. It can't have a tax clearance certificate for the company either. So I wonder how it can still tender anything.

At least under BR employees still have rights to exercise as affected persons, under Chapter 6 of the Companies Act, No. 71 of 2008 (section 128(1)(a)).

[snoopy]

A distinction must be made between government guarantees and cash injections, because they're not the same thing and this confusion is muddying the waters of the SOE debate.

A government guarantee represents the state effectively signing surety on behalf of the company for a private market loan or bond offering, but no actual money leaves government accounts unless the company defaults. Moreover, as with any loan or bond, the company is still responsible for both paying interest and paying back the loan or bond at its maturity date.

So it's incorrect to say that government (or, if you prefer, taxpayers) spent money for each of those bailouts. That's not what happened, and no funds were transferred from government accounts. In effect, the SA government took on loans without needing to pay the interest and principal, as long as the SOEs kept operating profitably.

To use an analogy, if you're starting out in life and want to buy a car but your own credit isn't good enough, you could ask your parents to co-sign and provide surety. As long as you keep paying the monthly payments up until you pay off the loan amount, your parents will never have to spend a single Rand to cover the loan. However, the debt reflects on their credit score and makes it harder for them to take on more debt until it's paid off.

The problem is that previous administrations, while systematically destroying the SOEs, were also too willing to allow them to fund ongoing operations by taking on this type of debt. It was semi-sustainable before the credit downgrades, when the government guarantee meant that interest rates could be kept relatively low, but since then the rates have become progressively more expensive and more difficult to repay.

In SAA and Denel's case, nearly all of the government assistance has been in the form of these guarantees, with only a tiny proportion being direct cash injections. While struggling to emerge from the immense damage done by the Zuma years, they've therefore also had to spend time, effort, and money on a delicate debt balancing dance to rollover accrued debt without being stuck with unaffordable repayment rates.

With SAA that dance has come to an end. The labour strike was the last straw and business rescue is probably the last option the government has. It also, as far as I can tell, has no choice but to provide the additional R2 billion to prevent SAA from going bankrupt before the BRP is finished, which would trigger a default on SAA's government-guaranteed debt. That in turn, via cross default clauses, could trigger a default on other government debt and effectively bankrupt the country.

In my opinion, government's actions on SAA have little to do with saving the airline, which may be impossible, and everything to do with trying to get it off the books in the way that avoids either causing a default on that debt or forcing the government to immediately pay it back, for which it doesn't have the available funds.

[snoopy]

By May last year SAA (the SOE) had not generated a profit since 2011 and had already received state guarantees totaling nearly 20 billion Rand. Besides the cash injections made with tax payer money over the same period.

If you are employed by SAA, then just make sure you know that you are an affected person in the BR, and you have rights in terms of the Companies Act, going forward.

10 business days after the appointment of BRP everyone will have voted on whether its viable to execute a BR plan or not. And by then SAA would have had to produce the last 2 year's financial statements to the BRP.

[Jfairwell]

One of the BRP's first tasks will be to convince IATA not to suspend the 083 ticket stock in the global distribution system. If he fails, they all go home.

[GL]

One of the BRP's first tasks will be to convince IATA not to suspend the 083 ticket stock in the global distribution system. If he fails, they all go home.

When business rescue was first threatened Gordhans response was that IATA would increase their security deposit by at least a further R1 billion. Can you shed any more light on this claim?