SAA eyes loan from private financial institutions

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South African Airways (SAA) has confirmed that it is negotiating a loan with financial institutions to cover its short-term expenses.

A spokesman for the South African Public Enterprises ministry told Flightglobal that SAA is undertaking the process of raising a loan.

"SAA is borrowing from private financial institutions against the loan guarantee approved in October. The transaction is still ongoing," he says.

The spokesman adds that the short-term loan will mature in three months.

Last October, the South African government granted the struggling flag carrier a 5 billion rand ($600 million) guarantee for a period of two years, starting from 1 September 2012.

The guarantee, which enables SAA to borrow from the financial markets, requires the airline's board of directors to develop a turnaround strategy that must be approved by the minister of public enterprises.

The guarantee also requires SAA to provide the public enterprises department and finance minister with details of how it will fund its upcoming fleet renewal.