Is SA Express worth R1?

Embattled state-owned airline SA Express is only worth R1, according to aviation company Fly Modern Ark.

The company, headed by businessman Theunis Crous, has tabled a fresh offer to buy SA Express, which is currently in provisional liquidation.

This is Fly Modern Ark’s second offer to purchase the airline.

In 2020 it offered the government and SA Express’s joint liquidators R100 million to purchase the airline and an additional R400 million to recapitalise the airline and pay its creditors.

The offer was however shot down and worker-owned consortium Fly SAX won the bid to buy the airline in September last year for R50 million. Roughly R24 million of the purchase price was raised following an auction of the airline’s assets in November last year, leaving an outstanding balance of R26 million.

By February this year, SA Express owed its creditors a total of R980 million. This excluded the R150 million owed to the SA Revenue Service and R183 million owed to workers – comprising R81 million in severance packages, R43 million in leave pay and R59 million in outstanding salaries.

In the latest offer letter – sent to SA Express provisional liquidator Aviwe Ndyamara and Public Enterprises Director-General Kgathatso Tlhakudi – Crous says following its earlier purchase offer, Fly Modern Ark and its investment partners lost interest in SA Express “as its condition as a company deteriorated to where it finds itself at the moment”.

In January the airline’s provisional liquidation was extended to April 29 to allow for the conclusion of the shareholding agreement between the provisional liquidator and the government.

The airline entered business rescue in February last year after it could not pay a R11.3 billion debt. The rescue process however failed and the airline was placed under provisional liquidation in April last year.

The R1 offer

In the offer letter, which was sent to Ndyamara and Tlhakudi on April 7 and has been seen by Moneyweb, Crous proposes that the sale be concluded on April 28, a day before the airline is expected to conclude its shareholding agreement.

Crous proposes that negotiations begin on April 12, with Fly Modern Ark signing a confidentiality agreement three days later. Within the period up to April 28, SA Express’s liquidator will be required to not proceed with any other offer to purchase the airline. The liquidator will also be required to finalise the application to wind up the airline, Crous says.

By April 18 Fly Modern Ark will make a formal offer detailing the terms and conditions of the transaction. The SA Express board will then be required to accept or decline the terms of the offer by April 19.

Brand name appeal

When approached for comment, Crous said although the airline is in financial distress and has sold off most of its assets, the SA Express name remains one of the most well-known brands in the local aviation industry.

Last year, the aviation company wrote to the Department of Transport, the International Air Service Licensing Council, and the domestic Air Services Licensing Council and requested that SA Express’s licences be cancelled “with immediate effect” because the airline had not been operational for most of the year.

Crous denied that the company remains disgruntled over its failure to win the initial bid to purchase the airline, adding that it remains hopeful that the new offer will be welcomed by the SA Express shareholder.

Approvals

For the transaction to be concluded, both the shareholder and the airline’s creditors would need to approve, according to Eric Levenstein, head of business rescue at Werksmans Attorneys. In this instance, the parties would have to enter into a compromise as outlined in Section 155 of the Companies Act.

“The provisional liquidator would propose [the] scheme to all the creditors and the shareholders and make whatever offer is available for the shares and for the creditors.… The proposal would have to be made [and] then be sent to court whereby a judge would use [their] discretion to determine whether or not the offer is fair,” he said.

Deal Leaders Africa MD Andrew Bahlmann says an offer to purchase a finally distressed company for R1 is not uncommon.

The success of the transaction depends on the shareholders, the creditors and the courts, he said.

The Department of Public Enterprises and the provisional liquidator were not available to comment by the time of publication.

This story first appeared on Moneyweb and has been republished with permission.