“A sham and a fraud on the creditors” is how one such creditor – SA Airlink – has described the proposed turnaround plan for SAA.
This is an urgent court bid to stay the adoption of the plan.
Business rescue practitioners (BRPs) Les Matuson and Siviwe Dongwana, who were appointed to try and salvage the state carrier, published their proposed plan for SAA on Youth Day.
Now SA Airlink has approached the High Court in Johannesburg in the hopes of interdicting the meeting scheduled for Thursday to vote on it. This pending the outcome of an application to set aside the decision to place SAA in business rescue and, instead, begin liquidation proceedings.
The case is expected to be heard on Wednesday.
In the court papers, Rodger Foster – the chief executive of SA Airlink – said the proposed plan brought “little clarity or certainty on how SAA will continue to exist as a going concern, following its business rescue”.
“There is no basis on which the BRPs can contend that SAA will be able to continue in existence on a solvent basis. This is simply unattainable, even in terms of the proposed restructure of SAA,” he said.
Foster pointed to various concerns with a draft proposed plan raised at a meeting earlier this month and said the published version did not address them.
“The proposed plan does not appear, in any material way, to deal with the submissions made by the creditors, despite the BRPs indicating that significant changes would be made,” he said.
He said further that in some respects, the proposed plan in fact left the creditors in a worse position than the draft had.
Under the draft proposed plan, he said further, general concurrent creditors would be paid an amount of R600 million over a period of three years and would receive a form of ‘equity’ if there was any money still outstanding at the end thereof.
“The position under the proposed plan is the same, save for the fact that there is no longer provision for the form of equity as set out in the draft proposed plan. Rather, under the proposed plan, concurrent creditors are left with an amount of R600 million, payable over three years, with no guarantee of any return,” he said.
“While it is Airlink’s submission that the proposed equity was in no way desirable, the position is even worse under the proposed plan. There is now no commitment from the shareholder even to attempt to ensure the proposed minimum payment is made to concurrent creditors”.
Foster said liquidating SAA would allow for the airline’s assets to be sold “and for proper and meaningful investigations to be held into the financial affairs of SAA”.
“This could potentially result in the recovery of assets or action(s) taken against directors, the shareholder and others who may have been responsible for the hopelessly insolvent state of SAA and its inability to satisfy the debts owed to its creditors,” he said, “Under business rescue however, SAA’s debts owed to concurrent creditors will simply be ‘discharged’ in terms of the proposed plan.”
Of the impact on SAA employees, Foster said even under the proposed restructure SAA “will continue to experience losses as it has in the past”.
“In the circumstances, it is reckless to retain employees in circumstances where SAA will not be able to pay them,” he went on.
“Further, the focus of business rescue is – or should be – on creditors’ claims.”
Foster charged that liquidating SAA was “the only viable option.”
The department of public enterprises (DPE) on Monday confirmed it would be moving to oppose the application.
“The DPE will also oppose SA Airlink’s application that SAA be placed under provisional liquidation,” the department said in a statement.
In addition, it said it was “aware of plans by the National Union of Metalworkers of South Africa (Numsa) and the South African Airways Cabin Crew Association (SACCA) to interdict the creditor’s meeting through the courts” – and would oppose this too.