Privatisation of South African Airways nudges forward, Mango amends plan

The partial privatisation of South African Airways (SA, Johannesburg O.R. Tambo) is progressing with the news that the Takatso Consortium has concluded its due diligence of the national carrier six months after it was announced as the preferred strategic equity partner.

“The Takatso consortium can confirm that negotiations with the Department of Public Enterprises (DPE) to buy a 51% stake in South African Airways (SAA) are continuing, with the due diligence now completed with no material issues identified,” Takatso’s chief executive officer, Gidon Novick, said.

“The transaction is a large and complex one, and the parties are committed to concluding the deal in a timely manner,” he said in response to a query from ch-aviation as to the progress being made in negotiations with DPE on the share purchase agreement, which was subject to various approvals and pre-conditions.

Novick reiterated the consortium was not involved in the funding or management of SAA’s current operations.

As reported, Takatso is a joint venture between Johannesburg-based black empowerment asset fund manager Harith General Partners, the majority shareholder in the SAA transaction, and ACMI specialist Global Aviation Operations (GE, Johannesburg O.R. Tambo), the minority shareholder in the venture, which also owns the Lift Airlines brand.

SAA does not yet have access to the ZAR3 billion rand (USD203.5 million) that Takatso is supposed to inject over the next three years for the airline’s operating costs.

It has been allocated ZAR10.5 billion (USD649 million) in state funds to restructure and deal with its legacy debt, which enabled the airline to exit bankruptcy protection on April 30, 2021, and restart limited domestic and regional operations as a much smaller airline in September 2021. SAA is also sharing ZAR2.7 billion (USD183 million) with its cash-strapped subsidiaries, one of which, low-cost Mango Airlines (JE, Johannesburg O.R. Tambo) entered into voluntary administration on July 28, 2021.

Mango’s administrator, meanwhile, has published an amended business rescue plan that proposes that the 100%-owned SAA subsidiary secures a new investor. This comes after SAA prevented an early return to service of the subsidiary in December, insisting it secure a strategic equity partner first before resuming operations. SAA has made it clear that it wants to dispose of Mango entirely.

The amended plan published on November 25 proposes that the outstanding ZAR719 million (USD44.4 million) due to Mango from the state allocation be used to partly settle employee and concurrent creditor claims. All of the shares in the company will be sold to an investor (once secured) for a nominal consideration, whereafter the investor would subscribe for additional shares in the company, the proceeds of which would be used to top-up payments to the concurrent creditors. After that, the debt acquired by the investor through the cession of claims of concurrent creditors would be converted to equity to restore the company to solvency.

In the interim, as required by SAA, Mango will be mothballed, but its route rights and licences will be preserved as these may be critical for an investor.

The administrator will begin the search for a suitable Investor immediately after the adoption of the business rescue plan by creditors.