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Broke SAA in talks with PIC for loan

Jun 27 2017 14:55
Liesl Peyper

Cape Town – South African Airways (SAA) confirmed that it is in discussions with the Public Investment Corporation (PIC) for a loan, as the national carrier wants to diversify its debt portfolio, said its chief financial officer Phumeza Nhantsi.

SAA was appearing before the standing committee on finance on Tuesday about its quarterly report and turnaround plan. In an initial document, distributed to committee members on Monday, SAA stated that it made a loss of R734m year to date, which is for the months of April and May 2017. 

Alf Lees, Democratic Alliance spokesperson on finance, insisted during the briefing on getting clarity over rumours that the airline approached the PIC for a loan from the Compensation Fund and Unemployment Insurance Fund.

The PIC manages investments on behalf of both these funds.

SAA reportedly first approached the Government Employees Pension Fund (GEPF), also administered by the PIC, for a loan. The GEPF, according to Lees, refused to bail SAA out.

The meeting between SAA and the PIC allegedly took place on Friday, Lees said. “Did the meeting happen? We need to know this.”

He also wanted to know if SAA managed to renegotiate the management of its loans, as an amount of R9bn is due on June 30.

“Why are you waiting three days before the loan deadline?” Lees asked.

SAA previously acknowledged in a statement that R9bn will be due and payable to “one lender”.

Although SAA did not want to name the “lender”, it is alleged to be Standard Chartered Bank which has declined to renew SAA's loan facilities.

Nhantsi told journalists after the briefing that the remaining debt obligation after negotiations is R2.3bn and that SAA managed to negotiate that the balance be rolled over.

She pointed out that it is not a case of lenders “recalling” SAA’s loans. “The loan is maturing and one of the lenders said it would not extend the loan.”

Asked if SAA has the cash reserves to honour the repayment, Nhantsi said SAA is working with government to “find a solution”.

National Treasury director general Dondo Mogajane said earlier during the briefing that although negotiations are at a sensitive stage, he was confident that the loan would be repaid by the June 30 deadline.

He also stressed that a final decision on an equity partner has not been made and that a number of avenues are being considered. As previously, Mogajane did not rule out the PIC as an investor option.

Asked for comment about the likelihood of granting a loan to SAA, PIC spokesperson Sekgoela Sekgoela told Fin24 by email that it would be inappropriate for the PIC to comment further on information that may either be “speculative or market sensitive”.

“The PIC’s investment decisions will continue to be directed by its own investment processes and the investment mandates of its clients, which include the UIF and funds of the Compensation Commissioners.”

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