NEWS

Another Blow For SAA As Second Bank Refuses To Extend Loan

Now two banks have refused to extend loans to SAA, which become payable at the end of September.

25/08/2017 06:55 SAST | Updated 25/08/2017 06:57 SAST
Siphiwe Sibeko / Reuters
REUTERS/Siphiwe Sibeko

A second bank, Citibank, has refused to extend its loan to SAA, in what is yet another blow to the struggling airline's financial status, Business Day reported on Friday.

A leaked secret Cabinet memo revealed this week that finance minister Malusi Gigaba has plans to sell government's stake in Telkom to give SAA another bailout, to the tune of R7.8 billion.

"The situation is deteriorating and [is] untenable as SAA is not generating sufficient cash to pay its suppliers on time. Coupled with SAA's lenders' unwillingness to further extend funding to the airline, even with government guarantees, a situation has now arisen for the shareholder [government] to take urgent measures in resolving the airline's funding challenges," Gigaba wrote in his memo.

According to Business Day, Standard Chartered Bank became the first bank to refuse to roll over its loan of R2.2 billion in June.

Treasury was then forced to step in with an urgent bail-out so that the debt could be settled.

The Citibank loan is one of several, all amounting to R6.8 billion in total, which become payable at the end of September, Business Day reported. SAA will reportedly not be able to pay its debt to Citibank.

The loan was first mentioned by the DA's Alf Lees in the National Assembly this week. Now the finance ministry says the disclosure has scuppered the negotiations between it and the banks.

Citibank said it would not comment on the report now, according to Business Day.

But SAA's chief financial officer Phumeza Nhatsi confirmed Citibank had written to SAA informing it that it would not extend its loan. Nhatsi reportedly said SAA was still in talks, trying to get the bank to change its mind.

Treasury spokesman Mayihlome Tshwete said Gigaba also planned to meet with Citibank. He added that the disclosure by Lees had strengthened the hand of lenders in negotiations, and said SAA had now lost its leverage.