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Consortium proposes R21bn loan to SAA for 51% stake

Jan 03, 2019
Fly Modern Ark and Cerberus Capital Management – a consortium of local and international investors – have made an unsolicited loan offer to SAA to the tune of R21 billion in return for a 51% stake in the bankrupt airline.
 
In September, media reported that SAA would need R21 billion between then and 2021, when the airline is expected to return to profitability.
 
In his mid-term budget speech in October, Finance Minister Tito Mboweni had announced a R5 billion bailout for SAA.
 
Last month, SAA’s acting chief financial officer (CFO), Deon Fredericks, told Parliament that the airline would need a further R3.5 billion between then and end-March 2019.
 
On Saturday SAA spokesperson Tlali Tlali said lenders had agreed to advance a facility that would see the national carrier through to March next year.
 
In an email sent last week by Fly Modern Ark’s co-founder, Theunis Crous, to various stakeholders – including SAA chief executive Vuyani Jarana and Public Enterprises Minister Pravin Gordhan – Crous confirms that talks regarding the funding were held between his team and airline officials.
 
“As indicated, our company – in partnership with local and international financiers – has engaged with Vuyani Jarana, [former interim CFO] Robert Head and [SAA treasury boss] Lucky Ncobela with regard to funding SAA in the short, medium and long term, which included the potential equity transaction related thereto.”
 
The department of public enterprises has said that SAA needs an equity partner, but has not revealed the size of the stake that it is willing to sell.
 
Crous’ email reads further: “The above discussions culminated in a teleconference with ourselves, our international partners ... These discussions were constructive and fruitful, and we were to engage after the minister of finance’s mid-term budget vote in October 2018.”
 
However, the email shows that following Head’s departure from SAA, the meeting did not happen.
 
Added Crous: “We are firmly of the view that we, as a consortium, would add intrinsic value to the turnaround strategy of SAA over and above the funding requirements.”
 
Gordhan acknowledged Crous’ correspondence via an email written by a person named Selatswa Masenya: “On behalf of Mr Pravin Gordhan ... I hereby acknowledge receipt of your correspondence ... the contents thereof have been noted and will be brought to the minister’s attention at the earliest opportunity.”
 
Crous told Press last week that SAA needed an equity partner.
 
“We are offering them R21 billion as a loan and we are prepared to take 51% and then plough in more money to recapitalise the business. SAA initially expressed an interest in the idea but later went quiet. Cerberus knows how to turn around companies.”
 
Tlali confirmed that a meeting with Fly Modern Ark had taken place in May at the airline’s head office in Kempton Park.
 
“Fly Modern Ark wanted an opportunity to present their capability, which they suggested could be beneficial to SAA’s turnaround strategy, including addressing our liquidity challenges. The discussion with Fly Modern Ark did not include any discussion regarding a strategic equity partner.”
 
He said the troubled airline was not involved in any bid to to find an equity party, adding that if that process did happen, it would be led by the government.
 
Tlali stressed that the discussions with Fly Modern Ark centred on funding, not the acquisition of a stake by the company. He denied that a teleconference took place.
 
Adrian Lackay, spokesperson for the public enterprises ministry, said government was currently not involved in talks to acquire potential partners.
 
“Acquiring an equity partner for SAA would require a significant capital injection from government upfront. For a commitment of this nature to take effect, it is essential that the company is first stabilised operationally in order for government as the shareholder to realise optimal value from a strategic equity partnership.”
 
The ministry, Lackay said, had received various unsolicited bids from companies wanting to acquire a stake in the airline.
 
“In terms of the Public Finance Management Act and the Constitution, such bids cannot arbitrarily be considered, entered into or accepted. It would have to follow due process.”
 
Lackay said that SAA, with government’s support, was working to raise sufficient funding to meet its immediate and medium-term liquidity requirements
 
 
Source: City Express