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Fly SAX, a worker owned entity, has suspended its bid to raise seed funding to buy cash-strapped regional airline SA Express through crowdfunding platform Uprise.Africa.
The seed funding will instead be raised by an anchor investor who will recapitalise SA Express and take full ownership of the airline to get it off the ground, according to the group’s spokesperson Thabsile Sikakane.
“Crowdfunding is not completely off the table. It’s just that for now in order to recapitalise the business, we needed immediate cash which the [new] anchor investor is more than willing to put up,” says Sikakane.
Sikakane is keeping mum on the name of the new anchor investor but says it is a “reputable South African company”.
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The entity was given the green light in October last year to buy the distressed airline.
Initially, Fly SAX has estimated that it would require R250 million as start-up capital for the airline, with R200 million to be sourced from the anchor investor and through equity crowdfunding.
That plan has now been put on hold and the anchor investor is in full control of the deal, Sikakane says, adding that the public offering will only reopen once the airline resumes operations.
The remaining R50 million would be payable in the form of a bank guarantee and from the sale of the airline’s assets. So far, the sale of the airline’s assets has raised roughly R24 million, leaving an outstanding balance of R26 million.
READ MORE: Court grants SA Express liquidators three-month extension to probe airline issues
The outstanding balance is expected to be provided by the new investor. The amount needed to recapitalise the beleaguered airline is still unknown, according to Sikakane.
SA Express has been under provisional liquidation since April last year.
The airline’s rescue practitioners were granted a four-month extension by the Johannesburg High Court last month to allow for the conclusion of talks related to the shareholder agreement to avoid final liquidation.
The airline is drowning in debt, owing R980 million to its creditors, R150 million to the SA Revenue Service and R183 million to workers who have not been paid since February last year.
Sikakane says the new anchor investor will not be taking on this debt.
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Moneyweb has previously reported that Fly SAX had secured two investors – Abu Dhabi-based Imperial Capital and the Landile Shembe Foundation, which were initially brought in to help the airline restart its operations.
Sikakane says the two investors remain but will only be brought in once the airline has been recapitalised by the unnamed anchor investor.
The next step will be to secure the approval of the airline’s creditors and sign a share sale agreement with the Department of Public Enterprises.
This process would enable Fly SAX to meet the requirements of capital adequacy, according to Uprise.Africa CEO Tabassum Qadir.
This article first appeared on Moneyweb and was republished with permission.
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