South Africa Comair (MN, Johannesburg O.R. Tambo) has revealed details of the binding offer it has chosen ahead of the publication of its business rescue plan, which is now due out on September 2.
According to Southern Africa’s Travel News, Business Rescue Practitioners (BRPs) Shaun Collyer and Richard Ferguson told creditors during a virtual presentation on August 27 that the ZAR1.5 billion rand (USD89.7 million) offer includes ZAR500 million (USD29.9 million) to be used to acquire 90-99% of the airline’s shareholding. The first ZAR100 million (USD5.98 million) would be advanced in two equal tranches in September and October as secured post commencement funding (PCF). Thereafter, a stake of up to 15% may be availed to suitable B-BBEE partners within 12 months.
The offer also proposes a debt-funding package of about ZAR1.4 billion (USD83.8 million) from lenders, of which ZAR600 million (USD35.9 million) would be in fresh funding (ZAR150 million (USD9 million) as a Revolving Credit Facility (RCF) and ZAR450 million (USD27 million) in aircraft finance) and about ZAR800 million (USD48 million) from the deferral of existing debt (capital and interest for 12 months and six months, respectively).
The investors have also proposed ZAR200 million (USD12 million) in working capital support loans, including a ZAR100 million prepayment from local health insurer Discovery to be advanced in October. Concurrent creditors would receive a paltry ZAR40 million (USD2.39 million) given that unsecured claims against the airline total at least ZAR1.5 billion.
In order for the disbursement of the ZAR100 million to go ahead, two preconditions have been laid down: shareholder and creditor approval for the business rescue plan, and some form of collateralised security (three unencumbered B737-400s, simulators and other assets are being considered). Disbursement of the remaining ZAR400 million would depend on regulatory and statutory requirements, changes in employment terms to be agreed with certain employees, and ongoing negotiations with the consortium on debt (CP). The restart of operations has been costed at ZAR700 million (USD41.9 million).
In terms of the investors’ plan, Comair’s workforce will be cut from 2,200 staff to 1,800, its fleet will be reduced to a maximum of 21 owned aircraft – B737-400/800s – meaning its sole B737-8 and other outstanding B737 MAX will be returned to their lessor. A new board will also be constituted from a new shareholder base. The new executive management would include former executives Glenn Orsmond, Kirsten King, Iain Meaker, Brian Kitchin and Reshika Singh. The proposal also includes the signing of an exclusive agreement between Comair and Discovery Vitality and maintaining a relationship with Boeing and British Airways, its franchisor.
Creditors and shareholders will vote on the plan (in its third revision) on September 11.
If the plan is accepted, sales, marketing, and MRO operations would start on November 1, with Kulula Air and British Airways-branded flights to resume on December 1 and increase over the next seven months until June 2021.
According to The Daily Maverick, a rival bid, said to have been submitted at the eleventh hour, came from another consortium called Harith-Lanseria which includes Harith General Partners, a South African private equity firm which co-owns Johannesburg Lanseria International Airport. Under this proposal, Harith-Lanseria would inject ZAR50 million (USD3 million) into Comair while it is in business rescue and a further ZAR700 million (USD42.2 million), which could be availed as soon as September 4, to recapitalise it.
The CEO of Lanseria International Airport, Rampa Rammopo, told Business Maverick the offer is backed by institutional investors among them the Government Employees Pension Fund (GEPF).
The newspaper said Rammopo had notified the BRPs about the GEPF’s backing in a letter dated August 21.
Harith-Lanseria expects Comair to resume flights by October 1, 2020. However, as with the Moritz Consortium, Harith-Lanseria said its offer is conditional on creditors approving the business rescue plan.
Overall, if all conditions are met, the BRPs expect Comair’s business rescue process to be over by March 31, 2021.