SA Express placed under provisional liquidation

The High Court in Johannesburg granted an order on Tuesday 28 April 2020 for the provisional liquidation of SA Express, the state-owned airline that was placed under businesses rescue by the same court on 6 February. 

SA Express, whose flight routes typically serve smaller cities in SA, becomes the first state-owned entity to be placed under provisional liquidation after the failure of its business rescue process. 

The appointed business rescue practitioners of SA Express, Phahlani Mkhombo and Daniel Terblanche, launched an urgent court application on 25 March to provisionally liquidate the airline because it has completely run out of cash and had no reasonable prospects of being rescued. 

The Department of Public Enterprises (DPE), which oversees the operations of SA Express as its sole shareholder, did not oppose the provisional liquidation application.

In a hearing about the liquidation application on Tuesday 28 April, which was held via a Zoom video call, Judge Mpostoli Twala said Mkhombo and Terblanche had satisfied the merits of having SA Express placed under provisional liquidation. 

This means that the business rescue proceedings of SA Express have been discontinued and the court may appoint a liquidator on a provisional basis. A liquidator can be appointed to safeguard SA Express assets and not assess claims against the company by creditors (including commercial banks) until the final liquidation of the airline is ordered by the court. 

DPE was not immediately available to comment about the court order. 

Twala called all affected SA Express parties to put forward their reasons or show good cause on why the court should not order the final liquidation of the airline. A hearing for the possible final liquidation of SA Express is expected in June. A final liquidation implies the immediate death of SA Express as its operations would permanently shut, all 691 employees would lose their jobs and assets would be sold to pay creditors.

Prejudiced affected parties 

Twala was not satisfied that the rescue practitioners adequately served the liquidation application to SA Express affected parties including DPE officials, the airline’s management and some unions representing workers.  “If the parties are not given an opportunity notifying them that this is a step being taken by business rescue practitioners, then they are prejudiced,” he said. 

When the rescue practitioners launched the application, it was mostly served to affected parties via email and not by hand through a sheriff of the court.  In his order, Twala condoned the rescue practitioner’s “failure to comply with the rules relating to service [legal notices and documents being served].”

He said the order to place SA Express under provisional liquidation should be published widely in the Citizen Newspaper and the government gazette for all affected parties to be aware of the matter and comment on it ahead of the final liquidation hearing. This is another measure put in place by Twala to ensure that affected parties are not prejudiced. 

SA Express was placed under involuntary business rescue by the high court on 6 February 2020 after a court application by the airline’s former service provider and creditor, Ziegler SA.

The main factor that pushed the rescue practitioners to apply to liquidate the airline is delays in funding from the Department of Public Enterprises and National Treasury – in the form of a government guarantee – that will enable SA Express to continue operating while a final business rescue plan is put in place. 

The rescue practitioners required between R438-million and R691-million in funding from the government, but this has failed to materialise since SA Express was placed under business rescue. Without this funding, the rescue practitioners cannot solicit more funding from commercial banks or state-owned development finance institutions to fund the airline’s immediate working capital requirements. BM

 

Article updated to include other aspects of the court order.

BM