Moody's downgrades African Bank

Moody's Investors Service said it downgraded African Bank Ltd.'s long-term senior debt rating to Caa2 from Ba1 and national-scale issuer ratings to Caa2.za/NP.za from A3.za/P-2.za. The review for downgrade, which began in May to assess the impact of increasing provisioning charges and concerns regarding the bank's ability to maintain its capital levels and funding sources, has been extended.

The agency said the downgrade reflects the expected losses that senior bondholders will sustain following the announcement by the South African Reserve Bank on Aug. 10 that it placed the bank under curatorship. The restructuring plan imposes implied losses of 10% on both senior debt and wholesale deposits and a possible suspension of interest payments on these obligations (although interest will still accrue).

The review for downgrade will focus on implementation risks related to the restructuring plan and the risk in Moody's view of higher than currently expected losses being imposed on senior creditors and depositors.

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