Comair will hopefully begin flying again in December if the business rescue plan published today (2 September) is accepted. Creditors and shareholders now have until 18 September to consider and adopt the plan.
The publication of the plan follows negotiations with a preferred investor which will see a fresh equity injection of R500 million in return for a 99% shareholding. Up to 15% of this shareholding will be allocated to a suitable BBBEE partner within 12 months.
The first R100 million will be paid in two equal tranches in September and October as secured post-commencement finance. Additional funding from lenders of R1.4 billion is required in order to successfully implement the adopted plan. This will comprise R600 million in net new debt.
Existing debt will be deferred to provide the remaining R800 million, with capital payments deferred for 12 months and interest for six months. Comair will be de-listed from the JSE and a new board constituted in due course.
The turnaround plan is focused on rationalising operating costs and growing ancillary revenue.
In line with this, the workforce will be reduced from approximately 2 200 employees to 1 800 through a voluntary retrenchment and early retirement programmes, as well as the continuation of the Section 189 retrenchment process that the company commenced prior to business rescue. The fleet will comprise 20 aircraft of which 17 will be next-generation Boeing 737-800s and the remaining three Boeing 737-400s. This fleet mix increases the proportion of owned aircraft, which limits exposure to foreign currency risk.
The aircraft will gradually return to service from December with a seven-month ramp-up period until June 2021.
Other elements of the offer include maintaining the existing relationships with British Airways, Discovery Vitality and Boeing.
In the event that the suspensive conditions in the plan are not met, the plan details how the company will be wound down in a structured manner as this will achieve a better return for creditors than a liquidation.
Richard Ferguson, one of the business rescue practitioners, says that if creditors approve the plan the business rescue process should be concluded by 31 March 2021, if not sooner, after which Comair will continue to operate as a sustainable business.
“It is important to understand that what happened to Comair was the result of an eco-system problem that has seen some 600 airlines around the world cease to operate. It was not something that was business specific. Comair is a national asset. Getting it back in the air will save 1 800 jobs, provide the flying public with more choice and competitive fares, strengthen the aviation sector and contribute to the broader South African economy.”
Notes for editors
- Should more detail be required, the full business rescue plan can be found here:
- The Comair BRPs received five offers from potential investors. A revised offer for R1.4 billion plus deferrals was preferred by the banks and incorporated into the business rescue plan.
- An additional ten offers were received for aircraft, non-core assets and parts of the business.
- Deloitte independently assessed the expressions of interest.
|Commencement of Business Rescue Proceedings and Appointment of BRPs||5 May 2020|
|Consultation with Affected Persons on the strategic plan||4 & 5 June 2020|
|Received a non-binding Expression of Interest from an investor #1 (subsequently withdrawn)||21 June 2020|
|Received a non-binding Expression of Interest from an investor #2||22 July 2020|
|Received a Binding Expression of Interest from an Investor #3||23 July 2020l|
|Appointed Deloitte as Corporate Finance Advisors to assess the expressions of interest||6 August 2020|
|Obtained short term bridge funding as PCF for August 20204||7 August 2020|
|Received a non-binding Expression of Interest from an investor #4||11 August 2020|
|Received a revision to the non-binding Expression of Interest from #4||27 August 2020|
|Negotiations with investors and lenders||28 August 2020|
|Final offer incorporated into business rescue plan||To date|