South African treasury seeks conditions on SAA loan guarantees

South Africa’s National Treasury wants strict conditions attached to any guarantees it provides for loans to the country’s embattled state airline, according to two people familiar with the matter.

Treasury and Department of Public Enterprises officials met Saturday to discuss ways to restart South African Airways, the people said, asking not to be identified because the talks are private. Representatives of two South African banks attended the talks, they said.

SAA halted operations and sought bankruptcy protection in December. The carrier’s administrators say 10.5 billion rand ($613 million) is needed for the airline to resume operations. Finance Minister Tito Mboweni is prepared to provide guarantees on 4 to 5 billion rand of that amount, subject to stringent criteria, the people said.

It’s unclear where the funding would be sourced from and there’s no agreement yet on any bailout, the people said. President Cyril Ramaphosa has backed the airline’s rescue, they said.

National Treasury spokeswoman Mashudu Masutha-Rammutle and SAA spokesman Tlali Tlali referred requests for comment to the DPE, whose spokesman Sam Mkokeli didn’t immediately respond to a request for comment. The carrier’s business-rescue practitioners didn’t immediately respond to a request for comment.

Equity Partners

Treasury guarantees may encourage private lenders to provide financing to SAA, the people said. Any government funding may also help ensure a future equity-partner deal, which is currently envisaged by the end of the year, the people said.

Twenty private-sector funders, private-equity investors and partners have submitted unsolicited expressions of interest in a restructured SAA, and those are being assessed, the Department of Public Enterprises said.

Ethiopian Airlines Group is in talks with SAA about providing assistance, people familiar with the situation have said. The Addis Ababa-based carrier is seeking control, possibly in the form of a management contract, and that may be a sticking point, the people said.