SAA secret memo confirms it cannot meet Airbus payments
An internal South African Airways (SAA) document a court ruled on Thursday the media could publish, has warned the board that the airline could not meets its commitments to Airbus and its creditors and implored it to file for business rescue or face liquidation.
Should Airbus issue a notive of default or seek to terminate the purchase agreement for breach, this may trigger an event of default allowing lenders and lessors to accelerate their debts, terminate leasees and take other enforcement actions,” the November 6 memorandum from the carrier’s executive team to the board warned.
“All could trigger financial distress and/or insolvency for SAA.”
The document was penned to advise the board of the urgency in addressing correspondence from Airbus and set out the ramifications of failing to do so.
It reiterated that SAA did not have the money to meet the newly imposed obligations to Airbus and cover its other debts, and forecast that it would run out of cash by the end of last month.
Since the carrier was trading under insolvent circumstances, continuing to do so would constitute reckless trading in terms of section 22 of the Companies Act. Therefore, the board had to apply for business rescue or the directors would be obliged to file for liquidation.
“The decision by the board to pass a resolution for business rescue needs to be done urgently to enable a business rescue practitioner to take control for the purposes of having a business rescue plan approved and thereafter implemented,” it stated.
“If the board decides that there is no prospect for business rescue, the directors are obliged to file for liquidation on an urgent basis.”
– African News Agency
Photo: SAA website