Consortia table multimillion-rand offers to buy Comair

A group of investors has come to the rescue of Comair by making an offer to inject R500-million into the JSE-listed airline operator, which is fighting for its survival through a business rescue process. 

Business Maverick understands that the group of investors (or consortium) – called the Moritz Consortium – comprises individuals linked to the family that founded Comair 77 years ago.

If the consortium’s offer is approved by the creditors of Comair, the operator of Kulula and British Airways flights in SA, the company will delist from the JSE and have a new management and board.

Comair would also resume flights by 1 December 2020 after it was grounded following the decision by the government to impose travel restrictions on 27 March to slow the spread of Covid-19. The Comair board placed the company under business rescue on 5 May because it didn’t have enough working capital to pay expenses and debt obligations. Business rescue is an attempt to restructure the affairs of financially distressed companies.

Details of the consortium and its offer to inject capital into Comair will be disclosed in a business rescue plan that will be published at the close of the business day on Friday 28 August 2020.

The Comair business rescue practitioners, Shaun Collyer and Richard Ferguson, delivered a presentation to the company creditors and shareholders at virtual meetings on Thursday 27 August, where all parties were updated about efforts to rescue and restructure Comair. 

Business Maverick has seen a copy of the presentation, which said the offer tabled by the consortium will be in two tranches: an injection of R100-million into Comair to keep the company operating as the business rescue plan is implemented, and the remaining R400-million will be in the form of an equity injection (purchase of the company’s shares).

The first phase of funding (R100-million), which is called an “advance”, will only be injected into Comair if 75% of creditors vote in favour of implementing the business rescue plan. A meeting has been scheduled for 11 September 2020 by the rescue practitioners for the vote by creditors. 

The second phase of investment (R400-million) will be released only after the consortium’s buyout offer is approved by the Competition Commission and JSE, as Comair’s shares are still listed on the bourse but were suspended from trading when the company submitted itself for business rescue. 

If all conditions are met, Collyer and Ferguson (the rescue practitioners) expect the business rescue process to be over “before 31 March next year [2021], if not sooner”.

However, at the eleventh hour, the rescue practitioners received another buyout offer from a separate consortium called Harith-Lanseria, which is prepared to inject R700-million into Comair as early as 4 September 2020 to recapitalise it. The consortium includes Harith General Partners, an investment house that is one of the owners of Lanseria International Airport in Gauteng.  The Harith-Lanseria consortium has sweetened the offer by throwing another R50-million to keep the company operating as the business rescue plan is implemented.

According to Rampa Rammopo, the CEO of Lanseria International Airport, the offer is backed by institutional investors including the Government Employees Pension Fund (GEPF), the custodian of pension savings belonging to 1.2-million current and retired public servants.

Rammopo notified Collyer and Ferguson about the GEPF’s backing in a letter dated 21 August 2020, which was obtained by Business Maverick.

Harith-Lanseria plans to restart Comair flights by 1 October 2020. But like the Moritz Consortium, Harith-Lanseria said its offer depends on whether creditors approve the business rescue plan.

If all conditions are met, Collyer and Ferguson expect the business rescue process to be over before 31 March 2021, if not sooner.

They believe the adoption of the business rescue plan will be the best option to save Comair from collapse and save about 1,800 jobs. In addition, they say, the adoption of the business rescue plan will also result in creditors having the best chance to recoup most of the monies they are owed by Comair, which is estimated to be more than R1-billion.

The rescue plan is expected to set aside R40-million to pay concurrent creditors, whose claims are not backed by the company’s assets. But the amount is not a dead cert as it depends on the final count of existing concurrent creditors.

But if the business rescue is not approved, Collyer and Ferguson would move to a structured wind-down of Comair operations, which would involve the sale of its assets in an orderly manner to pay creditors and the company’s other debt obligations of R4.6-billion.

If this option is rejected by creditors, then Collyer and Ferguson will be forced to discontinue business rescue proceedings, which might bring Comair closer to the worst-case scenario of liquidation. This would imply the death of Comair after 77 years in the skies. DM/BM