CAPE TOWN – An internal SAA document warned that the airline could not meet its financial commitments to both Airbus and its creditors, and implored the board to file for business rescue or face liquidation.
On November 24, the airline sought an urgent interdict to stop several media houses from publishing the leaked document's contents. On Thursday, that application was set aside, allowing the media to publish the memorandum's contents.
The main issue addressed in the memorandum is the deal SAA made with Airbus with regards to new aircraft which SAA is unable to pay.
“Should Airbus issue a notice of default or seek to terminate the purchase agreement for breach, this may trigger an event of default, allowing lenders and lessors to accelerate their debts, terminate leases and take other enforcement actions,” the November 6 memorandum from the carrier’s executive team to the board warned.
“All could trigger financial distress and/or insolvency for SAA.”
The document was compiled to advise the board of the urgency in addressing correspondence from Airbus and set out the ramifications of failing to do so.
It reiterated that SAA did not have the money to meet its newly imposed obligations to Airbus and cover its other debts, and anticipated it would run out of cash by the end of last month.
The document warned that since the carrier was trading under insolvent circumstances, continuing to do so would constitute reckless trading in terms of section 22 of the Companies Act. Therefore, the board had to apply for business rescue or the directors would be obliged to file for liquidation.
“The decision by the board to pass a resolution for business rescue needs to be done urgently to enable a business rescue practitioner to take control for the purposes of having a business rescue plan approved and thereafter implemented,” it stated.
“If the board decides that there is no prospect for business rescue, the directors are obliged to file for liquidation on an urgent basis.”
African News Agency