Local commercial banks will provide an initial two billion rand (£105 million) in post commencement funding (PCF) which will shore up SAA’s finances in the short-term while a full rescue plan is agreed, published and adopted, SAA said in a statement.
A second instalment of PCF, amounting to 3.5 billion rand (£185 million), has also been agreed with the Development Bank of Southern Africa, SAA confirmed late on Tuesday.
“Stakeholders of the airline should now have comfort that the rescue process is on a significantly sounder footing,” said SAA. “Passengers, travel agencies and airline partners may continue to book air travel on SAA with confidence.”
It comes after several operators vowed to stand by SAA, and the destination itself, amid the carrier’s ongoing financial difficulties – Somak Holidays, African Pride and Premier Holidays all told TTG they remained committed to South Africa.
‘Strategic asset’
While the talks come as welcome respite for SAA, the carrier has already been forced to consolidate a number of domestic and international routes and services owing to its finances and has reiterated it will have to undergo a restructure and seek a commercial partner to place it on more stable footing.
“The restructuring of SAA will provide an opportunity to develop a sustainable, competitive and efficient airline with a strategic equity partner remaining the objective of government through this exercise and will result in the preservation of jobs wherever possible,” said SAA.
“SAA is a key strategic asset which needs to be positioned to provide reliable connectivity to markets within South Africa, the African continent as well as servicing selected international routes.”
SAA’s full financial statement read: “The business rescue practitioners of South African Airways SOC Ltd (the practitioners), supported by the Departments of Public Enterprises (DPE) and National Treasury (NT), have been successful in obtaining the balance of the post commencement funding (PCF) required to meet the short term liquidity requirements of the airline for the period until the business rescue plan (the plan) is published and adopted.
“The advancement of the funds comes on the back of the business rescue process which began on 5 December 2019, with the local commercial banks providing the initial PCF of R2 billion in addition to the existing exposures to SAA.
“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 R3.5 billion, with an immediate draw-down of R2 billion.
“Furthermore, funding for the restructuring phase after the plan is adopted is being considered by potential funders.”
