Comair business rescue practitioners want more money
In a recent letter to creditors, Shaun Collyer and Richard Ferguson proposed that their business rescue practitioner fees be increased to a ‘market-related hourly rate’ of R4,000, excluding value-added tax. They are currently paid a statutory hourly rate of R2,000, including VAT.
The business rescue practitioners of Comair, the operator of Kulula and British Airways flights in SA, have proposed an increase of at least 100% in the fees they earn for restructuring the struggling airline operator.
The proposal by rescue practitioners Shaun Collyer and Richard Ferguson has angered some Comair creditors, who have accused the pair of attempting to enrich themselves while the airline operator is facing financial pressure.
Two Comair creditors told Business Maverick that they would reject the proposal for the fee increase at a meeting scheduled for 20 July 2020. Creditors will be asked to either support or reject the proposed increase in fees – through a vote – earned by Collyer and Ferguson, who were both appointed as Comair rescue practitioners on 5 May 2020.
Although Comair is still solvent, it was placed under business rescue because it doesn’t have enough working capital to pay expenses and debt obligations. Collyer and Ferguson will publish a business rescue plan on 28 July 2020.
In a letter to creditors dated 14 July 2020, Collyer and Ferguson proposed their fees be increased to a “market-related hourly rate” of R4,000, excluding value-added tax (VAT). Collyer and Ferguson currently each earn an hourly rate of R2,000 or R25,000 a day, including VAT. These are the maximum amounts that business rescue practitioners can charge for a large company such as Comair, according to the Companies Act. The Act provides for business rescue, which is an attempt to restructure the affairs of financially distressed companies.
“In this regard, the regulated hourly tariff has not been updated since the publication of the Companies Regulations [or Act] in 2011, and the tariff is accordingly no longer market-related for the specialist skills and expertise required of the BRPs [business rescue practitioners] for a company of the size and complexity of Comair,” reads the letter by Collyer and Ferguson to creditors.
The proposed increase in the hourly rate from R2,000 to R4,000 (excluding VAT) means that Collyer and Ferguson could score an increase of at least 100%, but the percentage might be higher once VAT is included.
More fee proposals
Collyer and Ferguson have also proposed for Redford Capital, an advisory firm that has helped the duo with raising money for business rescue proceedings and engaging potential buyers of Comair’s assets, to be paid a monthly retainer fee of R250,000, excluding VAT. Collyer and Ferguson have also proposed a success fee to be paid to Redford Capital, which will be calculated at 1% (excluding VAT), of the gross funding it has raised for Comair during its business rescue proceedings.
An issue that is further vexing some creditors is that as business rescue practitioners of Comair, Collyer and Ferguson have proposed a retainer and success fee for a company (Redford Capital) of which they are also directors. “How can Collyer and Ferguson be independent as business rescue practitioners while they are also proposing fees for Redford Capital? Whose interests are they serving?” asked one creditor.
Solidarity, a trade union that has more than 200 members at Comair, wrote to Collyer and Ferguson on 15 July 2020, saying its members are “completely offended and shocked” by the proposed fees “while [Comair] employees continue to experience extreme hardship”. “Your attempts have enraged employees who are now questioning your independence and your intentions, especially after you have made it clear that the business is in severe distress,” Solidarity said.
But Collyer and Ferguson defended the fees proposed for Redford Capital, saying it was the only firm prepared to help with the restructuring of Comair at affordable terms.
To demonstrate Redford Capital’s work so far in the Comair business rescue, Collyer and Ferguson said: “To date, in the course of this [business rescue] process, Redford Capital has engaged with 47 parties, received 19 signed Non-Disclosure and Confidentiality Agreements, and received four expressions of interest [to either inject money in Comair or buy its assets]. Currently, the Redford Capital team is engaging with the providers of several detailed non-binding expressions of interest and is working expeditiously to progress such non-binding expressions of interest…” DM/BM