Embattled SAA gets unsolicited R21bn offer for 51% stake - report

A consortium of local and international investors are waiting in the wings to loan billions of rands to the embattled national carrier South African Airways - but their offer comes with a substantial equity share in the airline, reports Fin24 sister publication City Press.

The newspaper reported on Sunday that Fly Modern Ark and Cerberus Capital Management want a 51% stake in the cash-strapped airline in exchange for a R21bn loan, which is roughly what the ailing national carrier needs to keep running over the next few years.

SAA last had an equity partner in 1999, when the government sold 20% of the carrier to Swissair. It bought the stake back in 2002 when Swissair went bankrupt.

Fly Modern Ark’s co-founder, Theunis Crous, has engaged top management within SAA, including chief executive Vuyani Jarana regarding the unsolicited funding deal, according to City Press.

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Crous told the newspaper Cerberus knows how to turn around companies and is prepared to pump more cash into SAA to recapitalise the business. However he added: "SAA initially expressed an interest in the idea but later went quiet."

Adrian Lackay, spokesperson for the department of public enterprises, told City Press that while the unsolicited bids for SAA had been received, the company first had to be stabilised operationally. 

SAA has been working closely with National Treasury and the Department of Public Enterprises to steer itself to profitability. Fin24 reported last month that SAA interim chief financial officer Deon Frederick told Parliament that the carrier had a procurement requirement of R3.5bn by March, and needs to find the money.

• READ: SAA needs R3.5 billion by March, says interim CFO

The R3.5bn comes after SAA got R5bn from National Treasury that was announced during the medium term budget policy statement in October.

In a frank account of the entity’s finances, Fredericks told the portfolio committee that while SAA had received the R5bn recapitalisation from National Treasury, this would go towards paying a bridging finance debt of the same amount.

Fredericks noted that the group expects to incur losses of R5.2bn in the 2018-19 financial year and R1.9bn in the 2019-20 financial year, after reporting a net loss of R5.7bn in the 2017-18 financial year.

DA calls for robust action 

"Unless robust action is taken to put SAA into business rescue or an equity partner with deep pockets is found, the massive taxpayer bailouts of SAA will continue unabated," the DA said on Sunday.

The party's deputy finance spokesperson Alf Lees noted in a statement on Sunday that some conditions must apply if the offer from Fly Modern Ark and Cerberus Capital Management is to be considered.

"The proposed loans of R21 billion to SAA from the consortium must; not be backed by any government/taxpayer guarantees; and be used primarily to extinguish all existing loans to SAA that are backed by government/taxpayer guarantees.

"All existing government/taxpayer guarantees of R 19.1 billion must be withdrawn from SAA and no further guarantees must be issued," suggested Lees.

Bloomberg reported in November that talks were in place that SAA should sell shares to the public by listing on a stock-exchange, according to people familiar with the matter.

More immediate plans than the share sale include holding discussions with potential commercial joint-venture partners including Air Mauritius, one of the people said. That could lead to cost savings on routes to the Asian-Pacific market as the airlines would share operating costs.