September 26, 2017 / 3:31 PM / a year ago

UPDATE 1-South Africa in talks with Citibank on state airline debt

(Adds more details)

PRETORIA, Sept 26 (Reuters) - South Africa is in talks with Citibank on how to settle a 1.8 billion rand ($135 million) loan to the state airline due to be repaid at the end of September, Treasury Director General Dondo Mogajane said on Tuesday.

"We owe Citibank about 1.8 billion rand. We had an understanding with them to roll (the debt) to September. Citi did indicate to us that they will not be in a position to roll further and we engaged them. It's an ongoing consultation," Mogajane told journalists at a news conference.

Citibank South Africa's spokesperson was not immediately available for comment.

Mogajane said in total the airline had 6.9 billion rand of debt maturing at the end of September.

"We are engaging the lenders, so as much as 6.9 billion rand is due on paper it might just be that we don't have to pay the 6.9 billion, consultations continue," Mogajane said.

State-owned South African Airways (SAA) was in July provided with state funds to help it repay loans of about 2.3 billion rand to Standard Chartered.

SAA already relies on government guarantees to support its finances.

Finance Minister Malusi Gigaba, speaking at the same news conference, denied there was a plan to tap the government pension fund to bail out SAA.

SAA has been highlighted by all three major rating agencies as one of the problems facing South Africa's economy. The Treasury is under pressure to keep recent pledges to cut spending and reform governance at state firms to fend off credit downgrades deeper into "junk".

$1 = 13.3446 rand Reporting by Mfuneko Toyana; Writing by Olivia Kumwenda-Mtambo. Editing by Jane Merriman

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