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Latest on restructuring of African Bank

Sep 26 2014 17:57
Sens
Johannesburg - When African Bank [JSE:ABL] was placed under curatorship by the governor of the SA Reserve Bank (Sarb) Gill Marcus, on August 10 2014, it was to provide a stable platform to enable the restructuring of the bank and to provide stability to the banking sector as a whole, the bank said in a Sens statement issued on Friday afternoon.

The curator, Tom Winterboer of PwC confirmed in the statement that the bank continues to operate and to issue and collect loans, although with a lower appetite for credit risk.

The curator has maintained operational focus on offering sustainable levels of credit to appropriate customers and optimising collections on the lending book.

In accordance with the powers of the curator, all payments of interest and capital on all debt remain suspended, with the exception of retail deposits and trade creditors.

A consortium of six South African banks, together with the Government Employees Pension Fund (represented by the Public Investment Corporation), have undertaken, on terms, to underwrite a capital raising exercise in the amount of R10bn, to be used for capitalisation of a new "good bank" to be formed.

The good bank will be a new registered bank and a wholly owned subsidiary of a newly established holding company, which is intended to be listed on the Johannesburg Stock Exchange (JSE) in due course.

The core lending assets of the bank - referred to in the Sarb announcement of August 10 2014 as having a book value of R26bn which is net of portfolio impairments - will be transferred to the good bank.

It is intended that the Standard General Insurance Company (Stangen), currently a full subsidiary of Abil, will also be sold at fair value to become a subsidiary of the newly established listed holding company.

It is the curator's intention to conclude the above mentioned restructuring exercise during the first quarter of 2015. This is subject to a number of regulatory and stakeholder approvals and processes.

Senior unsecured debt holders

All senior unsecured debt holders of African Bank (wholesale depositors, corporate depositors, bond holders, holders of physical or dematerialised senior debt instruments and any other classes of senior unsecured debt), will be offered amended terms and will be transferred to the good bank, subject to a 10% haircut of the face value.

Face value here means principal capital plus accrued interest as at the date of curatorship.

Other key principles relating to senior unsecured debt holders include interest unpaid, but otherwise due for payment during the curatorship that will continue to accrue interest in line with the contractual rates as applicable to each senior unsecured debt instrument for those senior unsecured debt holders agreeing to amended terms.

It is anticipated that all senior unsecured debt holder capital maturities will be extended by up to 24 additional months.

Any due but unpaid interest accruing during the period of curatorship, together with interest accruing on unpaid interest due as mentioned above, is intended to be settled by the good bank, for those senior unsecured debt holders agreeing to amended terms within five business days of the restructuring transaction effective date.

It is intended that a committee comprising representatives of the senior unsecured debt holders will be formed to engage with the curator and develop the detailed amended terms for contemplation of all such parties.

In order to facilitate this engagement process, senior unsecured debt holders are therefore requested to contact the curator's office at curatorfunders@africanbank.co.za to provide details of their specific holdings in respect of each senior unsecured debt instrument, together with their contact details.

Retail depositors and trade creditors

Retail depositors will receive payment of interest and capital on contractual due dates during the period of curatorship. It is expected that retail deposits existing at the restructuring transaction effective date will be transferred to the good bank without effecting a haircut and otherwise on the existing contractual terms in place with the bank.

For the avoidance of doubt, retail depositors are considered to be natural persons who have deposited money directly with the bank. At the date of curatorship, retail deposits accounted for less than 1% of the total liabilities of the bank.

Trade creditors arising in the ordinary course of business prior to and during the curatorship period are expected to be settled as usual. Trade creditors as at the restructuring effective date are expected to be transferred to the good bank without effecting a haircut and on the existing contractual terms in place with the bank.

It is intended that a committee comprising representatives of sub-ordinated debt holders will be formed to engage with the curator. In order to facilitate this engagement process, sub-ordinated debt holders are requested to contact the curator's office at curatorfunders@africanbank.co.za to provide details of their specific holdings in respect of each sub-ordinated debt instrument, together with their contact details.

Once the above mentioned engagement process with senior and sub-ordinated debt holders has made significant progress towards a satisfactory resolution of the restructuring transaction, the board of Abil will engage with all classes of existing Abil preference and ordinary shareholders.

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abil  |  gill marcus  |  banking  |  financial services

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