How African Bank debt instrument works

Johannesburg - The curator of African Bank, Tom Winterboer of PwC, on Friday issued more details on the proposed instruments to be issued in the so called "Good Bank".

The Good Bank restructuring proposal of African Bank has been approved in principle by both the senior unsecured debt holder committee and the Tier II debt holder committee.

As part of the restructuring proposal two instruments will be issued in exchange for the subordinated funders' claims of approximately R4.4bn in African Bank.

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Winterboer has now provided further details specifically on one of these proposed instruments, namely the new subordinated 10-year (non-callable for five years) Basel 3 compliant Tier II instruments in Good Bank.

The Association for Savings and Investment South Africa (Asisa) has requested these further details in order to assist Asisa members in pricing their existing African Bank Tier II debt instruments.

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Pertinent details

Winterboer said about the proposed Good Bank Tier II debt instruments that a single instrument totalling R1.65bn will be issued in terms of the Good Bank Domestic Medium Term Note Programme and listed on the Johannesburg Stock Exchange.

The applicable floating interest rate will be the 3-month Jibar rate plus 7.25%, settled quarterly and will accrue from the earlier of the issuance of the Tier II debt by Good Bank or December 1 2015.

The maturity of the instruments will be 10 years from issue date, with an issuer call right after 5 years and one day from issue date.

The issue date will be the transaction effective date, being the date of commencement of Good Bank.
 
Existing Tier II debt holders in African Bank will be allocated a portion of the Good Bank Tier II instruments - amounting to R1.65bn. The allocation will be in the proportion to which of their African Bank claims - including accrued and unpaid interest - relates to the total African Bank Tier II claims, as at the date at which the exchange offer is made to them.

The instruments will be compliant with the relevant provisions and regulations to the Banks Act and applicable directives and guidance notes.

Winterboer will make further announcements related to the restructuring of African Bank in due course.

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