Alvarez & Marsal brought on board SAA rescue operation

09 January 2020 2 min. read
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Global management consultancy Alvarez & Marsal is now involved in the turnaround plan for South African Airways (SAA), having been called in to offer “objective, impartial insight” into SAA affairs. The group of firms tasked with the turnaround have until February to devise their plan.

The team of firms is termed the Business Rescue Practitioners (BRP), in keeping with SAA’s entry into Business Rescue – South Africa’s equivalent of bankruptcy – in early December. SAA has been in financial trouble for an extended period of time now, forcing it to seek help externally.

A financial crunch in recent years forced the state-owned enterprise to cut routes, which put a dent of R4 billion in its revenues last year, and giving the firm R6 billion in losses for the whole year. This, in combination with the firm’s R9 billion of debt has pushed the entity to explore various avenues to help stabilise the situation.

Alongside R20 billion in bailouts from the government, SAA has also been splashing out on consultants to help turn things around. The entity came into controversy last year, after sealing contracts worth millions with a number of consultants despite being in dire financial trouble.

Alvarez & Marsal brought on board SAA rescue operation

SAA’s public scrutiny continued later last year, when it appointed a number of senior executives, all with compensation packages stretching into millions of Rand. Despite repeated assurances that these were investments in restoring SAA’s financial fortunes, these measures have failed to have an impact.

SAA entered Business Rescue in early December, and creditors met on the 20th of December to discuss the way forward. At the meeting, the BRPs indicated that SAA could still hope for its finances to stabilise, provided unforeseen risks can be dealt with.

“Our primary objective of the business rescue process is to either rescue SAA through restructuring its affairs, business, property, debt and other liabilities and equity that maximises the likelihood of the company continuing on a solvent basis or develop a plan that results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of SAA,” said Leslie Matuson of Matuson & Associates, which is part of the BRP team.

Alvarez & Marsal has been brought on as an objective evaluator of SAA’s finances. The firm will leverage its expertise in financial turnarounds and restructuring, an expertise that it has applied in the context of airline companies on many occasions in its operations across the globe.