Returning to the skies appears a distant prospect for troubled low-cost airline Mango after the potential investor withdrew its offer of R130 million in working capital to help restart the ailing state-owned entity.

Mango’s business rescue practitioner (BRP), Sipho Sono, this week announced that, regrettably, on July 31, the investor informed him that it had second thoughts about the transaction and would not be proceeding.

According to Sono, part of the reason was that the delays have made scheduling a resumption of operations unrealistic, and the commitment of the other funding partner could not be secured.

“As the investor process has now failed, the BRP proposes that a structured wind-down should take place,” he said in his latest update.

Silver Peach Marketing, trading as AfricaStay, submitted an offer three years ago in August 2022.

The offer was made on behalf of a new company, which would be registered as Ubuntu Air for the transaction.

Sono said the investor confirmed the availability of sufficient working capital, which would be funded from its own balance sheet, to support the recommencement of passenger flight operations under the royalty-based model.

He added that the investor showed him an online bank statement reflecting money market deposits in excess of R130m.

The investor included proof of funding reflecting available funds in excess of R120m to provide for the start-up capital and future working capital aligned to its envisaged start-up plan.

A week before abandoning the transaction, on July 25, Sono and Ubuntu Air met to discuss the way forward, and the company maintained its commitment to concluding the deal through the acquisition of all shares in the company, even without acquiring the claims of non-assenting creditors.

At the meeting, according to Sono, the investor affirmed that it would forego the obligatory cession of claims from creditors who did not vote in favour of the plan (such as Aviation Co-ordination Services [ACS]) and which the Gauteng High Court, Johannesburg, declared it to be invalid, and that it would support an amended plan that removed the compulsory cession provision as against non-acceding creditors.

In June, ACS succeeded in its application to have the compulsory cession clause of the business rescue plan declared invalid and of no force or effect.

Judge Denise Fisher also declared that the business rescue plan cannot be implemented. In the event of Mango’s liquidation, the projected payment to concurrent creditors in a business rescue scenario is substantially higher than in a liquidation scenario.

Sono indicated that this is primarily because, in the liquidation scenario, the SA Revenue Service (SARS) will, as a statutory preferent creditor, enjoy priority over concurrent creditors, resulting in minimal recoveries for the latter.

SARS, as the preferent creditor, has a claim of about R207.2m, while foreign and local concurrent creditors are owed R4.56 billion and over R1.44bn, respectively.

Unflown ticket owners are owed more than R169m after the airline, wholly owned by national carrier SA Airways, was grounded in July 2021.

The BRP said rather than persist with appeal proceedings in the ACS matter, which will delay the conclusion of the business rescue proceedings and incur further legal costs, he proposed that an amended plan be published and put to the creditors for consideration and adoption.

Sono stated that the amended plan will provide for a structured wind-down and that it has reasonable prospects for rescuing Mango in that it will result in a better return for creditors than would result from its immediate liquidation.

In addition, the BRP envisages under the amended plan, if adopted, to proceed to pay distributions to creditors.

According to this option, Sono anticipates being in a position to pay an initial dividend (70% of the projected dividend) to creditors within 30 days of the adoption of the amended plan, with the balance to be paid within three to five months thereafter following the conclusion of the unflown ticket liability claim verification process, which is currently anticipated to be finalised by the end of next month.

Trade union federation Cosatu said it was disheartened by the loss of 501 jobs as workers were retrenched, a pain the organisation stated is made worse because Sono is the BRP.

“While it might appear unfair to blame Sono for the failed rescue, the truth is he has had four years in which to give Mango a new lease on life.

“He maintains that a structured wind-down will ensure creditors get more out of a rand than a liquidation would, (in the) meantime, he is smiling all the way to the bank, having earned a cool R11m from the unsuccessful rescue of Mango,” complained Cosatu.

loyiso.sidimba@inl.co.za

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