SAA business rescue practitioners believe they can avoid liquidation

SAA's business rescue practitioners have had their first meeting with the embattled state-owned airline's creditors. 

In a statement, Les Matuson and Siviwe Dongwana said the meeting was aimed at informing creditors as to whether or not there is a reasonable prospect of successful business rescue, and to appoint a creditors’ committee and to receive valid claims from Creditors.

Les Matuson commented:  “Our primary objective of the business rescue process is to either rescue SAA through restructuring its affairs, business, property, debt and other liabilities and equity that maximizes the likelihood of the company continuing on a solvent basis or develop a plan that results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of SAA”.

“A vast majority of business rescue proceedings in South Africa have followed the second outcome”, noted Matuson

However, based on the availability of further Post- Commencement Funding, which National Treasury has undertaken to provide and the ongoing support from all the stakeholders, including Government, Employees, Trade Unions and Trade Suppliers, the joint business rescue practitioners are of the opinion that there is a reasonable prospect of a successful Business Rescue notwithstanding the inevitable risks and challenges."

The joint BRPs are of the belief that the business rescue process will achieve a better outcome for all stakeholders than immediate liquidation. 

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"PwC who has been mandated by the BRPs to prepare a short term cash flow forecast performed an initial high-level calculation. SAA leases most of the aircraft and accordingly, in liquidation, there will be limited assets that can be realised for distribution to creditors," said  Matuson. 

"The preliminary view is that after the allocation of the Distributable Proceeds to preferent creditors (comprising post-commencement financiers, preferent claims of employees, post-commencement unpaid lease payments) no funds will be available for distribution to concurrent creditors.  The contingent and damages claims will crystallise on a liquidation which will increase the quantum of the concurrent claims which reinforces the preliminary view that the estimated dividend for concurrent creditors is zero cents in the rand."

In terms of section 150(5) of the Companies Act 71 of 2008 (“the Act”), the Business Rescue Plan (“Plan”) should be published by the company within 25 days after the date on which the business rescue practitioner (“BRP”) was appointed. Accordingly, the Plan should be published by 13 January 2020.  The joint BRPs are currently evaluating various scenarios and funding requirements for each. Given that the different scenarios need to be communicated to the various stakeholders in order to determine their preferred scenario, the joint BRPs requested that the creditors approve an extension for the publication of the plan.

At the meeting, Matuson requested that the BRPs be given until the latest 28 February 2020 to publish the plan but that they would endeavour to publish as soon as they had the best possible Business Rescue Plan for the business. The creditors present voted unanimously in favour of the extension.