Categories: Business

How much SAA owes the banks and other creditors

The publication on Tuesday evening of the much-delayed business rescue plan for state-owned South African Airways (SAA) reveals that creditor claims could total as much as R38.4 billion.

This excludes the R9.2 billion owed to various local banks and financial institutions before the company was placed in business rescue. A further R2 billion in finance post the airline entering business rescue was provided by five commercial banks, with the well-known R3.5 billion loan from the Development Bank of South Africa (DBSA) on top of that.

An allocation totalling R16.4 billion to repay the bank lenders was announced by National Treasury in the February budget. This was never a new ‘bailout’ as these loans had been guaranteed by government.

The business rescue plan for the first time reveals how much funding has been provided by which financial institution. Between them, Absa and Nedbank have exposure totalling R5.2 billion. FirstRand is the least exposed of the five commercial banks, with a total of R949 million in funding (including the loan provided by Ashburton). These amounts do not include any capitalised interest since the airline was placed in business rescue.

Pre-commencement lender Facility type Limit/exposure
Nedbank Term loan R1.8bn
Absa Term loan R1.7bn
Investec Term loan R1.27bn
Standard Bank Structured loans R1.06bn
Nedbank Subordinated long term loan R784.7m
FirstRand Term loan R585m
Absa Bridge R558.5m
Investec Asset Management (now Ninety One) Term loan R253.1m
FirstRand General banking facility R250m
Nedbank General banking facility R200m
Standard Bank General banking facility R250m
Sanlam Term loan R168.8m
Absa Call loan R130m
Ashburton Investments
(part of FirstRand)
Term loan R113.9m
Momentum Term loan R105.5m
R9.22bn

* Utilisation under general banking facilities and call loan will, by definition, fluctuate.

Of the R2 billion in post-commencement finance (PCF) provided by the five banks, a full 60% (or R1.2 billion) was stumped up by Absa and Nedbank. This PCF funding is due to be repaid by July 31.

Post-commencement finance bank lender Limit/exposure
Nedbank R648.9m
Absa R556.6m
Standard Bank R304.8m
Investec R294.9m
FirstRand R194.7m
R2bn

Under the R16.4 billion allocation from Treasury, the R3.5 billion DBSA loan plus R168 million in interest will be repaid during the course of this fiscal. A further R3.8 billion will be repaid to local banks and finance institutions this year, with the same amount scheduled to be paid next year. The balance (R1.6 billion) will be paid in 2022/23. The payments are to be made by August 31 each year and exclude interest, which the business rescue practitioners estimate totals R1.8 billion.

The bank financing is the easy part …

It’s the creditor claims where things get chaotic.

The list of creditors runs to 33 pages, with more than 1 000 separate claims registered. Many of these are from the same company, likely as they pertain to different contracts. As examples, catering subsidiary Air Chefs has six claims, the Airports Company of South Africa (Acsa) has 14.

The R38.381 billion total is the worst case contemplated as it uses the greater amount between a creditor’s claim and the airline’s records.

In many cases, SAA has no record of claims. In other cases, its records show a vastly larger sum owed than the creditor’s claim. This is particularly prevalent when it comes to certain leasing entities as the amount would effectively be the entire lease liability.

There are 24 creditors where – based on their claims or the amounts reflected in SAA’s records – there is an exposure that is greater than R100 million.

Aircraft leasing companies comprise 21 of the 24 largest creditors (the Air Mauritius exposure is related to a lease deal).

Creditors above R100m Claim Company records Greater of the two
AirCastle (Wells Fargo) R7.12bn R7.12bn
Oriental Leasing 7 Company R1.98bn R5.98bn R5.98bn
Aero Design Global (Goshawk) R8.3m R2.38bn R3.38bn
Metal2017-1 Leasing XV R2.27bn R2.32bn R2.32bn
AC Finance MSN1779 Ltd R5.9m R2.27bn R2.27bn
Athena4 Aviation Leasing R1.3m R2.21bn R2.21bn
GE Capital Aviation Funding R2.19bn R2.19bn
TC Skyward Aviation Ireland R881.9m R1.8bn R1.8bn
Air Mauritius R2.3m R1.79bn R1.79bn
Avolon Aerospace AOE158 R1.77bn R1.77bn
Robert Watson R1.7bn R1.7bn
Comair R790.3m R790.3m R790.3m
Pembroke Aircraft Leasing 4 R772.6m R772.6m
ZS-SXA/B/C Ltd R3.6m R700.7m R700.7m
CDB Aviation R618.3m R687.6m R687.6m
Wilmington Trust SP Services R416.9m R528.7m R528.7m
CIT Aerospace International R485.3m R485.3m
AerCap Ireland Ltd R13.3m R336.4m R336.4m
GASL Ireland Leasing 6 R155m R199.2m R199.2m
IAE International Aero Engines R163.3m R162.9m R162.9m
International Lease Finance Corp R138.9m R5.2m R138.9m
Lihle/Servair R151.4m R151.4m
Air Lease Corporation R108.8m R111.8m R111.8m
Stellar Aircraft Holding 2 R57m R107.1m R107.1m

 

The creditor listed as “Lihle/Serevair” (no doubt Servair, an aviation services company) has a claim of R151 million, of which the company has no record.

The R790 million Comair claim is widely known.

A R1.7 billion claim from one Robert Watson stems from damages claims made by defunct airline Sun Air more than a decade ago. Claims by certain of the Sun Air shareholders were ceded to Watson.

Only 89 claims (of the more than 1 000) are listed as “verified and approved” in the business rescue plan. These are mostly small, with the largest running into single-digit millions. The practitioners say R600 million will be made available to pay concurrent creditors, once the plan is implemented. This will be paid over a three-year period and represents 7.5 cents in the rand.

Leasing companies will receive a total of R1.7 billion, “equivalent to six months’ rental payments less any letters of credit or cash deposits held”. This, too, will be paid over a three-year period.

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Published by
By Hilton Tarrant
Read more on these topics: South African Airways (SAA)