What does SAA owe the banks

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 lenderFacility typeLimit/exposure
NedbankTerm loanR1.8bn
AbsaTerm loanR1.7bn
InvestecTerm loanR1.27bn
Standard BankStructured loansR1.06bn
NedbankSubordinated long term loanR784.7m
FirstRandTerm loanR585m
AbsaBridgeR558.5m
Investec Asset Management (now Ninety One)Term loanR253.1m
FirstRandGeneral banking facilityR250m
NedbankGeneral banking facilityR200m
Standard BankGeneral banking facilityR250m
SanlamTerm loanR168.8m
AbsaCall loanR130m
Ashburton Investments
(part of FirstRand)
Term loanR113.9m
MomentumTerm loanR105.5m
  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 lenderLimit/exposure
NedbankR648.9m
AbsaR556.6m
Standard BankR304.8m
InvestecR294.9m
FirstRandR194.7m
 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 R100mClaimCompany recordsGreater of the two
AirCastle (Wells Fargo)R7.12bnR7.12bn
Oriental Leasing 7 CompanyR1.98bnR5.98bnR5.98bn
Aero Design Global (Goshawk)R8.3mR2.38bnR3.38bn
Metal2017-1 Leasing XVR2.27bnR2.32bnR2.32bn
AC Finance MSN1779 LtdR5.9mR2.27bnR2.27bn
Athena4 Aviation LeasingR1.3mR2.21bnR2.21bn
GE Capital Aviation FundingR2.19bnR2.19bn
TC Skyward Aviation IrelandR881.9mR1.8bnR1.8bn
Air MauritiusR2.3mR1.79bnR1.79bn
Avolon Aerospace AOE158R1.77bnR1.77bn
Robert WatsonR1.7bnR1.7bn
ComairR790.3mR790.3mR790.3m
Pembroke Aircraft Leasing 4R772.6mR772.6m
ZS-SXA/B/C LtdR3.6mR700.7mR700.7m
CDB AviationR618.3mR687.6mR687.6m
Wilmington Trust SP ServicesR416.9mR528.7mR528.7m
CIT Aerospace InternationalR485.3mR485.3m
AerCap Ireland LtdR13.3mR336.4mR336.4m
GASL Ireland Leasing 6R155mR199.2mR199.2m
IAE International Aero EnginesR163.3mR162.9mR162.9m
International Lease Finance CorpR138.9mR5.2mR138.9m
Lihle/ServairR151.4mR151.4m
Air Lease CorporationR108.8mR111.8mR111.8m
Stellar Aircraft Holding 2R57mR107.1mR107.1m

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.

Officially Published by Money Web

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