South Africa’s Treasury is in talks with banks to roll over 9 billion rand ($695 million) in debt due to be paid this month by struggling state airline South African Airways (SAA), a senior official said on Tuesday.

SAA, which is reliant on government debt guarantees of almost 20 billion rand, has been cited as a threat to South Africa’s economy by rating agencies that have recently downgraded the country’s sovereign rating to “junk”.

If SAA fails to meet its debt obligations, it may have ripple effects on the government’s wider guarantee framework, Treasury Director General Dondo Mogajane told legislators.

“So we understand the urgency and importance of acting carefully and in a very responsible way, so we are seized with the matter,” Mogajane said in response to questions during a presentation by state-owned SAA to parliament.

SAA’s chief financial officer, Phumeza Nhantsi, told journalists that around 9 billion rand of debt was maturing in a few days time, with around 6 or 7 lenders involved.

She did not name any of the lenders due to confidentiality clauses, but confirmed that they were looking to the Public Investment Corporation, Africa’s largest pension fund, as a possible lender in future.

According to the opposition Democratic Alliance (DA), Standard Chartered Bank has declined to renew its loan facilities of 2.3 billion rand to SAA due on June 30.

ABSA and Standard Bank are among other lenders, the DA says. ($1 = 12.9195 rand)

Source: Reuters