Wrap Text
Renewal of cautionary announcement, further update on the curatorship of African Bank and proposed restructuring
AFRICAN BANK INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
Ordinary share code: ABL ISIN: ZAE000030060
Preference share code: ABLP ISIN: ZAE000065215
(“ABIL”)
and
AFRICAN BANK LIMITED (in curatorship)
(Incorporated in the Republic of South Africa)
(Registered bank)
(Registration number 1975/002526/06)
Company code: BIABL
(“African Bank” or “the Bank”)
Renewal of cautionary announcement, further update on the curatorship of African Bank and proposed
restructuring measures
Background
1. Interested parties are referred to the statement regarding the curatorship of African Bank (“the
Curatorship”) that was made by the then Governor of the South African Reserve Bank (“SARB”), Ms Gill
Marcus, on 10 August 2014 (“the SARB statement”) and the Stock Exchange News Service (“SENS”)
announcement released jointly by ABIL and African Bank on 26 September 2014 (“the September SENS
announcement”).
2. Interested parties will recall that Mr Tom Winterboer was appointed as curator of African Bank (“the
Curator”) pursuant to the South African Banks Act No. 94 of 1990 on 10 August 2014. At the same time
the SARB statement set out proposals for a resolution of African Bank.
3. Whilst this announcement is made jointly by African Bank and ABIL, the directors of ABIL would like to
note that, as African Bank is in curatorship, they are not part of the decision-making process relating to
the restructuring of the Bank, as detailed in this SENS announcement, which does have a material impact
on ABIL. The directors of ABIL have issued a separate SENS announcement on 10 December 2014,
containing notice of a renewal of cautionary announcement and continued suspension of all securities of
ABIL, an update on the business rescue process in Ellerines (Ellerine Holdings Limited and its subsidiaries)
and an update on the release of ABIL’s annual results for the financial year ended 30 September 2014.
4. This announcement is intended to provide ABIL and African Bank stakeholders with an operational update
and an update on progress towards the restructuring of African Bank and related matters.
Curatorship Operational Update
5. The curatorship team, in conjunction with existing Bank management, has been continuing to work to
ensure the stability of the core operations of the Bank, specifically in relation to loan disbursements, loan
collections and ongoing lending strategies to maintain the market position of African Bank during the
current transition phase. This has included the introduction of new credit and lending policies, the
development of new business strategies and a review of operating costs.
6. Since the Curatorship, the lending risk criteria of African Bank have been tightened to take into account
the current circumstances of the Bank and economic situation in South Africa, and to be consistent with
the envisaged business model of Good Bank (as defined below). Following an initial period of
consolidation after the announcement of the Curatorship, during which lending was significantly
constrained, the Bank has subsequently commenced an active marketing campaign to promote new
lending business within its revised risk targets.
7. At the commencement of the Curatorship there was concern that the curatorship process may adversely
impact the loan collection levels at the Bank. This has therefore been an area of particular focus for the
Bank, and actual collections have been above initial expectations. A number of actions and enhancements
have been made to the Bank’s collections approach, in particular in response to the loss of the collections
services previously provided in the Ellerine Furnishers Proprietary Limited branches, as a result of the
business rescue processes underway. Various alternative collections and payment mechanisms continue
to be implemented specifically focussed on those customers who pay their instalments by way of cash as
opposed to debit order.
Restructuring Proposal
8. The Restructuring Proposal (“proposal”) contained in the SARB statement, together with the commentary
provided in the September SENS announcement, remains the basis of the restructuring proposal being
implemented by the Curator.
9. As noted in the SARB statement, a consortium of six South African banks, together with the Government
Employees Pension Fund (represented by the Public Investment Corporation) (“the Consortium”) have, on
certain terms, undertaken to underwrite a capital raising exercise in the amount of ZAR10 billion, with the
proceeds to be used for the capitalisation of a new “Good Bank”. Good Bank will be a newly registered
bank and a wholly owned subsidiary of a newly established holding company (“HoldCo”), which is
intended to be listed on the Johannesburg Stock Exchange (“JSE”) in due course. An application for a new
banking licence for Good Bank was submitted to the SARB on 28 October 2014. In addition, good progress
is being made in selecting and appointing the new board of directors and chief executive officer of Good
Bank and HoldCo.
10. It remains the restructuring proposal that the core lending assets of African Bank, referred to in the SARB
statement as having a net book value of approximately ZAR26 billion net of portfolio impairments, will be
transferred to Good Bank.
11. Whilst the SARB statement envisaged that the so-called “bad book” will be housed in a separate vehicle
with the support of the SARB, the Curator has presently determined that these assets will remain in
African Bank after the purchase of core lending assets by Good Bank. Good Bank will act as servicing agent
for the run-down of the remaining loan assets owned by African Bank, with Good Bank earning a market-
based fee for the services performed.
12. The SARB statement contemplated that The Standard General Insurance Company Limited (“Stangen”),
currently a wholly-owned subsidiary of ABIL, will also be sold by ABIL at fair value to become a subsidiary
of HoldCo. The restructuring anticipates that the Holdco will make an offer to acquire the total issued
share capital in Stangen from ABIL. The board of ABIL has retained KPMG Services Proprietary Limited to
perform an independent valuation of Stangen in order to provide a basis for the discussion between the
Consortium and ABIL. Detailed discussions between ABIL and the Consortium will commence once the
valuation has been finalised.
13. With respect to timing, the Curator previously intended to conclude the restructuring exercise during the
first quarter of calendar 2015, subject to a number of regulatory and stakeholder approvals. This
timetable envisaged Good Bank receiving the appropriate regulatory approvals to commence business on
an accelerated basis compared to what would ordinarily be the case for a bank start up. Whilst there has
been significant progress made to date, the need to receive the regulatory approvals prior to 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 of 2015.
14. African Bank is also aware of the recent announcement of Notice number 1077 in Government Gazette
number 38247 on 25 November 2014, which refers to the publication of the Banks Amendment Bill, 2014,
which sets out certain amendments to the Banks Act which, if passed, will provide some clarity in relation
to the scope of the Curatorship.
Below are additional details applicable to specific stakeholders:
(A) African Bank senior unsecured debt holders
15. The September SENS announcement set out the intended principles of the 10% haircut of the face value of
all senior unsecured debt, the arrangements for the accrual of interest in respect thereof and the
anticipated extension of all maturities of such debt for a period of up to 24 months.
16. Further to that announcement, it is anticipated that African Bank will engage with senior debt holders to
invite them to exchange their existing African Bank debt instruments which such senior debt holders
currently hold for new debt instruments, to be issued to African Bank by Good Bank. The process in
respect of listed or unlisted senior debt instruments (“Notes”) issued in terms of either the DMTN
programme registered with the JSE (“DMTN”) or the EMTN programme registered with the London Stock
Exchange (“EMTN”), (together hereinafter referred to as “programme debt”) is anticipated to be
undertaken on a series by series basis. In the case of wholesale depositors, corporate depositors and
holders of physical or dematerialised instruments not issued in terms of either programme referred to
above (together hereinafter referred to as “other senior unsecured depositors”), the exchange process is
anticipated to be on a direct offer basis with each such holder.
17. The new debt instruments issued by 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. There will also be certain other minor amendments – principally to the DMTN programme to
bring it in line with certain principles of the EMTN programme. It is intended that the new note
programmes of Good Bank will be registered with the JSE for the DMTN programme, and the LSE for the
EMTN programme (with Swiss Franc denominated bonds listed on the SIX Swiss Exchange).
18. In the case of programme debt, where more than 66.67% of the votes cast at a series meeting of DMTN
senior noteholders (and 75% in the case of the votes cast at a series meeting of EMTN senior noteholders),
in both cases convened in accordance with the terms of the programme debt, are in favour of the
exchange offer, the full series of notes will be exchanged. The Curator nevertheless intends to allow those
specific senior noteholders that accept the exchange offer to execute the proposed exchange, regardless
of whether other senior noteholders in such series disagree to the exchange offer.
19. For the purposes of evaluating the merits of the exchange offer made to senior unsecured debt holders
during the exchange solicitation process, a detailed disclosure of prospective financial information for
Good Bank and African Bank, reviewed by reporting accountants, will be provided, together with other
ancillary information such as the EMTN and DMTN programme circulars for Good Bank.
20. As noted in the September SENS announcement, those senior unsecured debt holders that consent to the
exchange process described above will, after the application of the 10% haircut, receive payment of
interest that is due and unpaid on an interest payment date occurring during Curatorship, on the
restructuring transaction effective date (together with interest calculated on such amount from the
relevant interest payment date until the restructuring transaction effective date).
21. Where a senior debt holder chooses not to accept the exchange terms, the existing claim will remain in
African Bank, subject to paragraph 18 above.
22. The September SENS announcement encouraged senior unsecured debt holders to identify themselves to
the Curator for the purposes of forming a senior creditors committee that would facilitate an engagement
process. The Curator has received notification from eight institutions that have formed an ad-hoc
committee and the Curator is aware of recent press statements regarding the senior ad hoc committee.
The Curator will continue to provide regular formal feedback into the market by way of SENS
announcements and remains available to meet directly with individual creditors and/or with the senior ad
hoc committee.
(B) African Bank retail depositors and trade creditors
There is no further update needed in this regard. Retail depositors and trade creditors are referred to the
September SENS announcement. Such parties are settled in the ordinary course of business at full contractual
value and under the proposal such parties are not subject to the 10% haircut. African Bank is accepting new
retail deposits.
(C) African Bank subordinated debt holders
The Curator continues to be available to engage with African Bank’s subordinated debt holders, both directly
and with a representative ad hoc committee organised to represent the interests of associated subordinated
debt holders. Once there has been sufficient progress on aspects of the restructuring process which pertain to
subordinated debt, the Curator will give further clarity to the market by way of formal SENS announcements.
(D) ABIL Preference and Ordinary Shareholders
Once the process with senior and subordinated debt holders set out above has made sufficient progress
towards a satisfactory resolution, the Board of ABIL will engage with the existing ABIL preference and ordinary
shareholders. We expect this to occur during the first quarter of 2015.
Renewal of cautionary announcement
Investors are advised that the curatorship of African Bank and the restructuring initiatives in respect of African
Bank and ABIL remain ongoing, as described above. During this time, trading in the debt securities of African
Bank will remain suspended. Investors are therefore advised to continue to exercise caution when dealing in
the debt securities of African Bank.
On behalf of the Board of ABIL (in so far as the information is applicable to ABIL) and the Curator of the Bank
Midrand
10 December 2014
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Footnote : T Winterboer was appointed as curator of African Bank Limited on 10 August 2014 by the Minister
of Finance of the Republic of South Africa and pursuant to the Banks Act No. 94 of 1990 (as amended) to
manage the affairs of African Bank Limited subject to the supervision of the Registrar of Banks. Please note
that Mr Winterboer acts in the aforesaid capacity.
Date: 10/12/2014 07:31:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
