(SAX) Buyer tables offer for SA Express

(SAX) Buyer tables offer for SA Express


Fly Modern Ark has tabled a bid to take over all government’s shares in SA Express (SAX), fork out R400 million to recapitalise the bankrupt airline and pay some of its creditors.

The airline, which has been mired in financial woes since it was grounded by the Civil Aviation Authority in mid-2018, went into voluntary business rescue in February.

After failing to secure funding, its business rescue practitioners filed an application at the Johannesburg High Court to have the company liquidated.

But Theunis Crous, chief executive of Fly Modern Ark, which allegedly has the backing of unnamed local and overseas funders, said there was value in SAX and that the company, as well as the 600 permanent jobs it creates, could be saved.

In 2018, Fly Modern Ark, in partnership with US-based Cerberus Capital Management, one of the world’s biggest asset managers, offered SAA a R21 billion loan in return for a 51% stake in the airline. Government declined the offer.

WE’RE CAUTIOUSLY OPTIMISTIC.
Zazi Nsibanyoni-Mugambi, president of the SA Cabin Crew Association
Crous declined to comment until discussions with the business rescue practitioners, government and the company’s creditors were completed.

“For now, I can just tell you that there’s an offer on the table,” he said.

Documents seen by City Press show that Fly Modern Ark sent the offer to SAX’s business rescue practitioners a week ago.

“The offer consideration would be for the government of South Africa to sell the 475 share capital it owns in the state-owned airline SA Express to Modern Ark Airline SA.

“Modern Ark Airline SA will make available after the share transfer an amount not exceeding R100 million to settle current creditors as per business rescue procedures and conditions. Fly Modern Ark will inject fresh capital to start up the airline after concluding the business rescue process,” reads the offer to purchase.

City Press understands the capital amounts to R300 million.

“Modern Ark will, with its South African aircraft owners and partners, facilitate making available a fleet of well-maintained aircraft to fly the routes of SA Express soon after the business rescue process,” reads the document.

CREDITORS AND EMPLOYEES ARE BLEEDING.
The entire offer, it stipulates, is also on condition that SAX’s business rescue practitioners withdraw the liquidation application and that the offer is accepted by creditors.

“An interim key executive management team will be selected by Modern Ark and SA Express, and will commence the management of SA Express from preliminary acceptance until the business rescue process is concluded, whereafter SA Express can continue its operations as normal. The business rescue process will last for a minimum period of 60 days to a maximum period of 90 days, or as deemed necessary by the business rescue practitioners.”

Zazi Nsibanyoni-Mugambi, president of the SA Cabin Crew Association, said Fly Modern Ark’s offer was an open secret.

“We all know about it, but until people actually put money on the table, there’s nothing much to say.

“SA Express shouldn’t be allowed to die. If the right person comes up with a complete business plan and a complete model, we’ll accept it. We just need to make sure that whoever takes over has pure intentions and is able to secure funding, save jobs and return the company to profitability. We’re cautiously optimistic,” she said.

A creditor who wished to remain anonymous said: “I just got off the phone with the business rescue practitioners and they told me there was an offer on the table. But they also told me they were concerned that R100 million might not be enough. I think they’ll send us a circular later tonight [Friday] or tomorrow.

“While we welcome anyone wanting to buy SAX, we think creditors and employees should be prioritised,” he added.

“At the moment, there’s a massive backlash. Creditors and employees are bleeding. And it will be difficult for us to comment fully before we see the offer. We want to know if it’s a genuine buyer or one of those fly-by-night chaps who promises investors he can secure the airline if it puts money in. We want to know whose money it is and what the expertise of the buyer is.”

The creditor said it could take up to six months to register SAX in the name of a new operator and that any buyer would need enough money to keep the airline going until then.

“There’s also the Air Licensing Council and the Competition Commission to consider, and all these processes could take up to six months. Add Covid-19 to the mix and you begin to understand that it could take up to a year before airlines return to business as usual.

“There’s also a big reputational risk associated with SAX. I don’t think consumers would be willing to use the airline. They may want rebranding so they can dissociate themselves from SAX completely. That, on its own, would cost a lot of money.”

At the time of going to press, the airline’s business rescue practitioners could not be reached for comment, and the department of public enterprises had not responded to questions put to it.