National Treasury steps in as Citigroup cuts SAA’s R250m credit lifeline

(Bloomberg) — South Africa’s National Treasury is working with South African Airways to ensure the company has enough liquidity to continue operating after Citigroup Inc. canceled a short-term credit facility.

SAA will issue a statement on Tuesday that explains the impact of the cancelation, Tlali Tlali, a spokesman for the Johannesburg-based carrier, said in an e-mail on Monday. Phumza Macanda, the Pretoria-based National Treasury’s spokeswoman, confirmed that the government was working with the airline earlier on Monday by phone.

“We confirm that Citibank has withdrawn SAA’s credit facility,” Tlali said. “We will issue a statement on Tuesday in response to this development and to enable everyone to understand what this means for SAA from a cash flow point of view.”

Citigroup on Dec. 24 canceled a 250 million-rand ($15 million) facility for SAA, leaving the airline without cash, Johannesburg-based Moneyweb reported, citing an internal document of the national carrier. The lender won’t reinstate the facility without a government guarantee, the website said.

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SAA, which is cutting costs to ease a dependence on state- guaranteed loans, accepted last month an instruction to lease five wide-body planes from Airbus Group SE, abandoning an alternative plan by Chairwoman Dudu Myeni and avoiding a $40 million payment that threatened its financial stability.

The carrier was instructed by Finance Minister Pravin Gordhan to proceed with the deal to lease A330-300s in line with a decision made by one of his predecessors, Nhlanhla Nene, who was fired by President Jacob Zuma on Dec 9. The transaction was opposed by Myeni, who wanted the planes sold to a third party in South Africa that would then lease them to the airline.