SAA wants R5billion from state

Sherilee Bridge

Sherilee Bridge

State-owned airline South African Airways (SAA) yesterday said it was looking for about R5,7billion from its shareholder to recapitalise its business.

SAA chairman Jakes Gerwel said while the airline's restructuring had been successful, it still faced "stormy days ahead" with the escalating oil price threatening its future profitability.

Gerwel dubbed the restructuring, which saw almost 2000 employees either resign or take voluntary retrenchment, "a life-saving intervention".

While the airline has received the full support of government, its only shareholder, he said SAA needed to ensure "proper recapitalisation" going forward. He said the airline was talking to its shareholder with regard to the recapitalisation, which he described as a "matter of urgency".

SAA chief executive officer Khaya Ngqula said some of the capital previously provided by government had been in the form of loans, but the business needed pure equity. This capital injection would be used to convert the airline's subordinated loans into equity, and an additional R3billion would be used to get the airline to its target debt-to-equity ratio.

Ngqula said the airline was aiming for between 35percent and 65percent debt to equity.

SAA has cash and cash equivalents on its books of R5,4billion compared with R2,4billion last year, but this may go towards financing new aircraft.

The airline is bemoaning the current capital structure.

"Either you work for the banks or you work for your shareholders," said chief financial officer Kaushik Patel.

In 2006-07 SAA was recapitalised by a total of R1,3billion, and another R1,56billion was secured in 2007-08 to assist with restructuring costs which totalled R1,3billion in the financial year to the end of March 2008.

Patel said these two loans were serviced at the Johannesburg Interbank Agreed Rate (Jibar) plus 30 basis points and Jibar plus 140 basis points, "which is expensive".

The conversion of the subordinated loans would save about another R300 million a year, said Patel. - I-Net Bridge