Comair's new business rescue plan approved
The business rescue plan will see a consortium invest fresh equity of R500 million into Comair.
On 18 September, the majority of Comair’s creditors and shareholders voted to adopt its new business rescue plan in which the preferred investment consortium will invest fresh equity of R500 million.
Comair CEO Wrenelle Stander welcomes the adoption of the business rescue plan, saying that entering business rescue had been a difficult decision, particularly as good progress was being made to fix the financial situation. However, she adds that the extraordinary circumstances of the lockdown meant the company was unable to earn any revenue.
“When the lockdown happened, business rescue became the only responsible course of action. Had we not made that tough decision, Comair would not have flown again. There may still be a few bumps on the way ahead, however now that the plan is adopted, at last clearer skies are in sight.”
According to a statement by the company, the consortium, which comprises a number of former Comair board members and executives, will get a 99 percent shareholding in return for their investment once the suspensive conditions set out in the rescue plan have been met. Up to 15 percent of this will be allocated to a suitable BBBEE partner within 12 months.
During the next two months, R100 million of the investment will be paid in two equal tranches as secured post-commencement finance.
The statement also said that the airline requires R1.4 billion additional funding from lenders, which will comprise R600 million in new debt. The remaining R800 million will be deferred debt, with capital payments deferred for a year, and interest for six months.
Comair will also be delisted from the Johannesburg Stock Exchange (JSE) and a new board will be appointed.
The new turnaround plan will focus on reducing operating costs and growing ancillary revenue. According to the statement, this will see the current workforce reduced from about 2,200 employees to 1,800 through voluntary retrenchment and early retirement programmes, as well as the Section 189 retrenchment process.
The plan will also see Comair’s fleet being restored to 25 aircraft, including two Boeing Max aircraft. These aircraft will gradually return to service from December with a seven-month ramp-up period until June 2021.
One of the airline’s business rescue practitioners, Richard Ferguson, says that a number of suspensive conditions in the plan must still be met. He explains that, if this does not happen, then the company will be wound down in a structured manner to achieve the best return for creditors. “That doesn’t diminish what an important moment this is for Comair, its employees, the investors and the South African flying public. After nearly six months of intensive work and negotiation in a fraught economic environment, it is an exceptionally positive result.”
If everything goes according to plan, the business rescue process should be concluded by 31 March 2021, after which Comair will continue to operate as a sustainable business.