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SAA's R1.8bn Saturday debt deadline nears

Sep 27 2017 17:14
Yolandi Groenewald

Johannesburg - Cabinet is deliberating on how to save state-owned South African Airways (SAA) from its latest cash crisis, after at least one creditor insisted it be paid by Saturday. 

The Treasury's director general Dondo Mogajane said Cabinet would offer possible solutions after the meeting on Wednesday. 

SAA has to pay back Citibank R1.8bn by Saturday September 30 as part of its debt obligations. As of Wednesday, there were no indications that the US-based bank would grant the airline a reprieve.

In total SAA owes R6.9bn of debt that has to be paid by the end of the September. In July, the government had to provide it with R2.3bn from an emergency fund to pay what it owed to Standard Chartered, who had also refused to roll their debt over.

Mogajane said that, while the airline had R6.9bn of debt in total maturing at the end of the month, negotiations with lenders might lessen this amount, and give the airline room to breath.

Citibank’s debt needs to be paid on Saturday, however, and Wednesday’s Cabinet meeting will have to decide where the money is going to come from.

“I can’t preempt what cabinet will decide,” said Mogajane. “We owe Citibank about R1.8bn. We had an understanding with them to roll debt to September.”

He said the bank told Treasury that they could not extend the repayment time for the debt.

“We can't allow a state company to default,” he said. “If any of the state companies defaults, it will have a cross default impact on government guarantees. This will have huge implications.”

Loss leader 

SAA recorded a loss of R1.5bn in the 2015/16 financial year, which rose to R4.7bn in 2016/17. It has already made a R1.3bn loss in the the current financial year to July.

It will need an estimated R13bn bailout over the next three years. It has already started cutting back on domestic routes in an effort to save money. 

Two weeks ago Treasury drafted a special appropriation bill to recapitalise SAA with a R10bn bailout, which it hopes to table in a special parliamentary sitting. 

But this option seems to have taken a backseat for now, as the finance ministry and Treasury try to hash out a solution for Saturday's payment deadline. 

Mogajane said Treasury’s larger plan on how to recapitalise the cash-strapped airline would only be revealed during Finance Minister Malusi Gigaba’s mini budget on October 25. 

While media reports over the weekend speculated that Treasury might dip into Public Investment Corporation (PIC) funds to help pay for SAA's debt, Gigaba and PIC boss Dan Matjila on Tuesday told journalists at a briefing that government had no plans currently to raid the PIC to save SAA.

Matjila also said he had rejected a request for a R6bn loan for the airline from its chairperson Dudu Myeni in May this year.

Mogajane, however, acknowledged at the briefing that Treasury had approached the PIC to consider buying its stake in Telkom, to help recapitalise the airline.

Telkom option

The Telkom deal, where government could sell some of its R12bn stake in Telkom, remains on the table and at this stage seem to be a favourite to recapitalise the airline in the long term. This 'Telkom option' came to light when a leaked Cabinet memo revealed government may sell its 39.7% stake in Telkom to raise SAA’s R10bn.

One option would be for the PIC buy these share.

Magojane said that for the September deadline, however, a Telkom sale would not have made a difference. “The conversation on Telkom is ongoing‚” he added.

PIC boss Matjila, meanwhile, said the corporation had an interest in acquiring more Telkom shares. However its “investment parameters” would have to be honoured if any such deal went ahead, as the PIC couldn’t take on the full stock that government had in mind.

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saa  |  dan matjila  |  dondo mogajane  |  malusi gigaba  |  bailout  |  debt  |  funding
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