Comair: 'Technically insolvent' SAA wanted more money

''It is a classic position of a company that simply can't meet its ongoing obligation,'' said David Unterhalter, who was first up among a phalanx of lawyers either defending or attacking an aspect of the multi-billion rand bailouts to South Africa's national carrier.

A full tally of loans to SAA is expected to be presented to Judge Hans Fabricius after lunch, but Unterhalter said that last September SAA wrote to the minister of public enterprises and said that its previous R5bn loan guarantee would only be available for one more month and this might have an impact on its liquidity.

 

In October 2012 the government granted SAA a R5bn guarantee for a period of two years.

 

SAA told parliament in February 2012 it needed between R4bn and R6bn for a recapitalisation programme.

 

One of the conditions for the R5bn guarantee in 2012 was that SAA's board had to develop a turnaround strategy.

 

In October 2014 SAA was again seeking government support, two years after it was granted the R5bn in loan guarantees.

 

In January 2015 Finance Minister Nhlanhla Nene said SAA will receive another R6.5bn injection from state coffers, even though he had said in the previous October that there would be no more bailouts and that the airline would have to restructure.

Unterhalter commented that using the words ''impact on liquidy'' was simply a ''nice way of saying 'we can't pay it back'''.

At that stage, it was already unable to repay a portion of the previous loan.

Unterhalter said that ''from the mouth of SAA'', their auditors were not able to sign off financial statements because they could not certify that the airline was a going concern.

A company in that position would either get an equity injection from the shareholder, or file for business rescue.

''But under the circumstances, the chair of SAA writes to the minister of public enterprises, explains the difficulty, and asks for an extension,'' he said.

''So that they can roll over the debt. All that you are doing with a company that is technically insolvent, is incurring further debt and has no resources to meet those obligations.

''They have gone through their working capital and they don't have the means to repay the loan. They are in difficulties. They are now concerned about technical solvency. So there is a recognition that SAA is technically insolvent.''

Farbricius commented: ''Well, that is common cause.''

Unterhalter said it was clear that loans and further debt would be incurred to pay it's existing debt.''My Lord, that is just a classic debt spiral. And that is exactly what SAA is referencing in its own going concern.

''Earlier, Unterhalter said that there were policies that supported commercial and competitive air transport in South Africa, and by organising loans for SAA, the ministers of public enterprise and finance had had no regard for these.''If you are going to effectively prop up an insolvent company, you at least have to have a regard for what is the basis of the policy, and in what measure."He did not understand how the minister of finance could allow it, as it was against policy, he submitted.''The question is, how many more houses could have been provided?" asked Unterhalter before the court went into the lunch adjournment.Nedbank, Standard Bank and CitiBank are among the respondents in the case.

 

Author: News24

NewsWire ID: 2548

File photo: Gallo images