Mango, the low-cost, state-owned airline currently in business rescue, has suffered another setback in its return to operations.
This is due to the Gauteng High Court in Johannesburg ruling that the proposed business rescue plan cannot be implemented.
The ruling came after the Aviation Co-ordination Services (ACS) brought Mango and its business rescue practitioner, Sipho Sono, to court over the viability of the rescue plan.
ACS is one of Mango’s creditors, owed over R23.3 million, and originally voted against Sono’s business rescue plan.
The main issue the ACS raises with the rescue plan is clause 6.2.6, which deals with how Mango’s creditors will be paid.
The clause states that all of the remaining balance of the claims of concurrent creditors will be ceded to the investor at face value.
Along with this, all concurrent creditors aside from the SA Revenue Service and the creditors in respect of the unflown ticket liability, will be paid a ‘top-up’ settlement for their claims.
This payment amounted to 4.43 cents per Rand, translating to a return of roughly R44,300 per R1 million.
Any debt acquired by the investor through the claims of concurrent creditors can also be converted to equity, subordinated, or otherwise dealt with in a manner that will ensure Mango can return to operations and solvency.
A key consideration is that Mango currently owes a total of around R2.91 billion to its creditors.
Consequently, under the terms of this clause of the rescue plan, most of these creditors will receive a negligible return at best.
The judge presiding over the case found that this clause and the plan amounted to nothing more than the confiscation of creditor claims in order for Sono to transfer them to an investor who pays no value for them or the shares.
“The compulsory cession contained in clause 6.2.6 of the business rescue plan is declared to be invalid and of no force and effect. It is declared that the business rescue plan cannot be implemented.”
Sono has indicated it intends to appeal this ruling.
Rocky road to recovery
Mango was placed in business rescue over four years ago after mounting debt and the withdrawal of government stakeholder financial support.
Recently, it was announced by Sono that the airline had entered the final stages of concluding a transaction with a selected investor that would pave the way for its return to operations.
Along with this, Mango and Sono announced an initiative to resolve the issue of unflown tickets, with it requesting that those eligible log onto the Mango Verification Portal.
Using this, Mango intended to pay those with unflown tickets with refunds or vouchers when the airline returned to operations.
This recent court ruling will likely derail this process and leave those with unflown tickets without compensation.
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