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Following SAA’s BRPs (business rescue practitioners) confirming that government would not assist the airline with further funding, liquidators are contacting the carrier’s creditors in an effort to gain support ahead of a potential liquidation appointment.
“It is normal process for liquidation firms to approach creditors ahead of a probable liquidation. SAA might have had a chance of a successful rescue if it wasn’t for the COVID-19 outbreak, but it is now most probable that the airline will be placed under liquidation shortly,” said a director of one liquidation firm. He confirmed to Tourism Update that his company was actively approaching SAA creditors for a requisition to be appointed as joint liquidators of SAA.
Structured wind-down or liquidation?
SAA’s BRPs told Tourism Update that the business rescue and the section 189 (retrenchment) process was continuing while the BRPs assessed the impact of the government’s funding decision. BRP Les Matuson said the BRPs’ objectives had always been to either restructure the airline to maximise the likelihood of its continuing on a solvent basis or to implement a structured wind-down of the organisation. Matuson implied that a structured wind-down could result in a better return for the company’s creditors or shareholders than an immediate liquidation. He added that the vast majority of business rescue proceedings in South Africa had followed the structured wind-down route.
CEO of the Association of Southern African Travel Agents (ASATA), Otto de Vries, said neither SAA nor its BRPs had approached creditors this week regarding a liquidation or wind-down, but added that when SAA went into business rescue in early December the BRPs had made it clear that creditors would be unlikely to see any returns on money owed to them should a liquidation take place (this is due to SAA’s liabilities far exceeding its assets). He added that it was unlikely that this position had changed in the last few months.
“The government’s decision to decline the BRPs’ requests for additional funding puts SAA in a very tenuous situation. The big question at present relates to the vouchers that SAA is currently giving out to passengers in lieu of refunds for bookings cancelled due to COVID-19. The trade has been told by SAA, the BRPs and Iata that clients’ money for tickets purchased following SAA going into business rescue was protected, yet the airline has already cut off refund applications. Asata is currently assessing the implications of SAA being wound down or liquidated and is trying to ascertain how clients can access the funds that we were promised were secure,” said de Vries.
Travel Insurance Consultants (TIC) Head of Travel Insurance, Jason Veitch, said it would be extremely difficult for SAA to get back on its feet now. He believes that a structured wind-down rather than an immediate liquidation, would be the best option for the airline as this was more likely to prioritise the interests of staff and ticket-holders than would be expected from a liquidation.
Veitch confirmed that TIC was still offering supplier insolvency cover for SAA tickets and that TIC policy-holders would therefore be protected should the airline be liquidated.
“The main objective of the BRP process was to create a better distribution to SAA’s creditors – as opposed to having it liquidated – but this no longer holds true with the withdrawal of government’s support. This means that the BRPs are likely to opt for a controlled wind-down or deregistration of SAA’s subsidiaries and operating divisions, which would include the holding company,” said Lead Consultant of TaranisCo Advisory, Gerrit Davids.
“A structured wind-down would be a phased approach with the main aim to dispose of the remaining assets and, where feasible, pay the creditors if there is anything left from such a process. For a liquidation to take place a high court application would be required to convert the BRP into liquidation, upon which the Master of the High Court will appoint a liquidator to sell off the assets. This process would terminate all jobs, with employees also becoming concurrent creditors of the airline, and it could take many years to complete the process, especially in relation to the size of SAA,” added Davids.
Source: tourismupdate.co.za