African Bank debtholders to receive exchange option in restructuring

By Caroline Salls

Pittsburgh, Dec. 10 – African Bank Investments Ltd. said African Bank Ltd.’s senior debtholders will be invited to exchange their existing debt instruments for new debt instruments, according to a news release.

African Bank said a September announcement set out the intended principles of a 10% haircut of the face value of all senior unsecured debt, the arrangements for the accrual of interest on that debt and the expected extension of all maturities of that debt for a period of up to 24 months.

The new debt instruments, which will be issued to African Bank by a new “Good Bank,” will embody the principles of the 10% of face value haircut and the maturity extension, which is expected to be 24 months from the date of the original maturity.

The claims of senior debtholders who choose not to accept the exchange will remain in African Bank, the release said.

The bank said its lending risk criteria has been tightened since its curatorship to take into account the bank’s current circumstances and the economic situation in South Africa.

Following an initial period of consolidation after the announcement of the bank’s curatorship, during which lending was significantly constrained, African Bank said it has launched an active marketing campaign to promote new lending business within its revised risk targets.

In addition, the bank said it has focused on loan collection levels, and actual collections have been above initial expectations.

Although “bad book” assets were originally expected to be housed in a separate vehicle, the bank said its curator has decided that these assets will remain in African Bank after the purchase of core lending assets. Good Bank will act as the servicing agent for the run-down of the remaining loan assets owed by African Bank, with Good Bank earning a fee for those services.

The bank said it expects to hold talks with existing preference and ordinary shareholders in the first quarter of 2015.

Although the curator previously intended to conclude the restructuring exercise during the first quarter of 2015, the bank said the need to receive regulatory approvals before the transfer of assets to Good Bank and the expected implementation and consent process means that it is more likely that the restructuring of African Bank will be completed after the first quarter.

African Bank is a Johannesburg-based lender.

© 2015 Prospect News.
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