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By Loni Prinsloo and Antony Sguazzin
(Bloomberg) — South African Airways administrators said they will decide within the next week whether to sell or liquidate the insolvent carrier if 10.5 billion rand ($620 million) pledged by the government fails to be delivered.
The business-rescue practitioners have placed SAA under care and maintenance in the meantime, suspending all operations, while they wait for the state to come up with the required package, according to a letter to creditors sent on Tuesday.
“Certain funders have indicated a willingness to provide a portion of the funding” subject to certain conditions, the administrators said, without giving further detail. How to proceed if a cash injection doesn’t come to fruition may include a sale of the carrier or its assets, with liquidation another option, they said.
The fate of SAA has become an emotive topic in South Africa as the country struggles to recover from Covid-19 and an economy that was in recession even before the virus hit. Public Enterprises Minister Pravin Gordhan has made the resuscitation of the airline a major priority, but Finance Minister Tito Mboweni has made clear he does not support further bailouts with limited state funds needed elsewhere.
The National Treasury said in July it would help “mobilize” funding, and Gordhan’s Department of Public Enterprises has repeatedly claimed to have received numerous approaches from interested private backers. Yet no formal offer has been placed more than two months later, and it’s not clear whether backing will be secured, despite some interest from Ethiopian Airlines Group.
The Treasury wants strict conditions attached to any guarantees it provides for loans to SAA, two people familiar with the matter said this week. President Cyril Ramaphosa has backed the airline’s rescue, they said.
SAA will fly the cargo and repatriation flights it has already committed to but won’t accept any more for now, a spokeswoman for the administrators said. South Africa is due to open its international border for commercial flights from Oct. 1, more than six months after closing them to contain the coronavirus.
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