1time & Comair look to grow

Nov 2010

Both 1time airlines and Comair have secured interesting sources of finance this week. In Comair's case the finance is to purchase new aircraft, whilst 1time haven't disclosed their intentions but it's probably the same.

1time signed a R50m standby equity distribution agreement with Yorkville, a United Kingdom-based investment fund (official name is YA Global Master SPV). The deal is in place for 32 months and lets 1time access liquidity as it requires through the issue of new shares to Yorkville, which they are obliged to purchase. Michael Snyman, 1time's financial director, said: “We are very pleased to have secured this agreement with Yorkville at this stage of the company's lifecycle. This facility provides us with the flexibility to raise capital in tranches as and when required and will assist in our continued growth strategy.”

In Comair's case, it has secured a credit guaranteed from the US government-backed Export-Import Bank of the US, covering the purchase of 8 new Boeing 737-800 aircraft. Erik Venter, joint-chief executive of Comair, says “This provides us with cost-effective financing and increases the attractiveness in the international financing market of funding our fleet acquisition. Ultimately this will ensure that South Africa maintains world class airline services".

1time is following the lower-risk strategy by issuing new shares rather than take on debt, whilst the debt Kulula is taking on gears up its balance sheet, providing the opportunity for higher returns but at higher risk. These strategies contrast with the ultra low-risk strategy followed by their fellow South African low-cost carrier, Mango Airlines, which is leaving it to its parent company (SAA) to fly routes outside of South Africa.

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