southside wrote: ↑Thu Nov 14, 2019 4:03 pm
Let's say SAA gets canned and that debt becomes due. So much debt is already due in other departments in SA? Why not get treasury to fork out 5 Billion every so often as they always do, towards that debt that can eventually be paid off without enquiring more debt and losses that SAA are currently doing on a daily basis? What is the worst case scenario if SA didn't settle it all at once?
I don't believe SAA can ever be fixed.
That way the loss making stops. Is this feasable? evanb?
Any liquidation can be managed/negotiated, but right now, if SAA had to inform creditors that they intended to voluntary liquidate the banks whose debt is guaranteed by Treasury would have an immediate claim. They would have to be paid in cash very quickly on the entire amount owed. There will be no negotiation. The challenge might be the covenants on other debt instruments by government that might be triggered by such a claim, so Treasury would likely want to avoid this situation.
The rest would be a slow process of liquidation and given that there are not many assets to sell those creditors wouldn't receive much. How much liability the Treasury would have is murky.
But there would be downstream effects. It would most certainly create a cash crisis at other SOEs and departments like ACSA, ATNS and CAA since these companies, to differing degrees, receive a disproportionate amount of revenue from SAA. The capacity will not be taken up entirely, and certainly very little in the short run.
It would also create other downstream effects in the private sector. Airlink will lose all their reservations and distribution, Comair will lose nearly a R1 billion owed to them and a bunch of technical support (the move to LHT has been slow). A bunch of foreign airlines will lose technical support in SA and the capacity will not be filled quickly.