SAA Bailout To See CitiBank Repaid
Government has given the ‘go ahead’ to use funds from the National Revenue Fund to shore up bankrupt South African Airways. An amount of R3 Billion will be used to prevent SAA from defaulting on its obligations to CitiBank who refused an extension of payment deadline.
If the Airline had defaulted they would have triggered a guarantee totalling R16.4 Billion thus freeing up the R1.8 Billion needed to cover the immediate due amount was well worth it.
Recently SAA had about R6.8 Billion in loans that have all matured at the same time and Treasury has been working non stop to try and get the various lenders to allow further time for repayment, including Citibank. Citibank became the second bank to refuse any such extensions.
In June this year, R2,2 Billion had to be paid to Standard Chartered Bank when they refused to extend their loan to SAA. They felt nervous and decided not to extend further credit. It is feared that other banks may follow suit leaving Government and the taxpayer to foot the bill as all debts could become due simultaneously.
Starting in November 2017 a new CEO will take the helm and it is hoped that combined with the extra R1.2 Billion working capital now made available by this ‘Section 16’ emergency authorization of R 3 Billion in funds by the Minister, can start to turn things around for the flailing airline. Already the airline has reduced the number of planes in the air and flights from the end of this month in an effort to see fuller planes flying at better profit margins.
Companies much like consumers need to ensure they adjust their spending as soon as they see their income drop. They need to make plans to increase income as expenses climb over time. And when in debt, it is important to make payments on time to your creditors. If unable to do so, then efforts have to be made to make arrangements for reduced payments with all your creditors. Fortunately for SA consumers, debt review is an option when facing serious financial distress. Each month around 15 000 consumers are entering the debt review process to help settle their debts with credit providers in a responsible but more manageable manner.