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THE LAND AND AGRICULTURAL DEVELOPMENT BANK OF SOUTH AFRICA - Land and Agricultural Development Bank of South Africa: update on liquidity and debt restructuring process

Release Date: 17/06/2020 17:30:00      Code(s): LBK32 LBK29 LBK37 LBK30 LBK26 LBK18 LBK35 LBK28 LBK27 LBK15 LBK36 LBK31 LBK38 LBK24 LBK22 LBK23 LBK20 LBK33       PDF(s):  
Land and Agricultural Development Bank of South Africa: update on liquidity and debt restructuring process

The Land and Agricultural Development Bank of South Africa
(JSE Code: BILB)
(“Land Bank” or the “Issuer”)

Land and Agricultural Development Bank of South Africa: update on liquidity and debt restructuring
process (“Restructuring”)

Further to the previous announcements in this regard, the Land Bank wishes to provide additional
details regarding the Restructuring process and current position of the Land Bank. Considerations on
the Restructuring remain ongoing and further updates will be provided on an ongoing basis. As a
second phase, the repurposing strategy (“Repurposing Strategy”) of the Land Bank will be
investigated and finalised.

1. Process followed to finalise the Restructuring

As previously indicated, the Land Bank appointed Rand Merchant Bank, a division of FirstRand Bank
Limited, as corporate finance advisors to advise on the Restructuring. The process followed to
finalise the Restructuring focuses on:

    a. raising a R3 billion liquidity facility from key funders;
    b. a liability solution to restructure funding obligations in a manner that will allow the Land
       Bank to continue to service these obligations according to a profile that better matches its
       lending book, whilst not unduly impacting the financial outcomes for funders. It is likely this
       process will result in the restructuring of maturities of funding obligations; and
    c. an equity solution to ensure adequate equity support, in addition to the restructured
       liabilities above, to allow the Land Bank to fulfil its legally mandated functions on a
       sustainable basis.



2. Timetable

It should be noted that the anticipated timelines discussed in this section are subject to change.

Negotiations around the liquidity facility are ongoing, with the process anticipated to be finalised
within the next fortnight, depending on negotiations with providers of this facility.

The process around the liability solution has commenced, with the following guidelines around
timing:

                                                                            2020

 Consideration of liability solution terms and mechanism by the Land        10 June
 Bank and National Treasury
 Discussions and negotiations with lenders around liability solution and    15 June – 15 July
 preparation of offer documentation
 Restructuring offer period                                                 20 July – 21 August
 Conclusion                                                                 31 August
The process to arrive at the equity solution has commenced and will run in parallel with the above
processes. It should be noted that any commitment by National Treasury will require approval by
Parliament.

It is expected that the Repurposing Strategy will be finalised by the end of September 2020.



3. Principles of liability solution

The objectives of the liability solution are to:

    a) cure the existing events of defaults and cross defaults on the Land Bank’s funding
       instruments;
    b) extend the term of all funding that has matured or will mature in the next 12 months to
       develop a more sustainable maturity profile; and
    c) provide existing funders with a credit-enhanced position subsequent to the implementation
       of the liability solution.

The Land Bank and its advisors are in discussions with various groups of funders to implement a
funding restructure with broadly the following terms:

    a) no loss of capital or accrued interest is anticipated;
    b) the maturities of restructured funding instruments will be extended, but will be credit-
       enhanced and repriced; and
    c) a voluntary tender and exchange process to holders of listed instruments issued under the
       current DMTN programmes, to replace existing listed instruments with credit-enhanced and
       repriced listed notes issued under a new DMTN programme. Existing listed instruments will
       remain in place for those holders who elect not to participate in this exchange process.



4. Principles of the equity solution

The board of directors of the Land Bank (“the Board”) and National Treasury, the shareholder of the
Land Bank, are of the view that the Land Bank’s capital structure should be strengthened to enable it
to perform its legally-prescribed developmental role, and are working with the Land Bank’s
corporate finance advisors to determine the appropriate level of additional equity required to
recapitalise the Land Bank. This process will take into account the work that is underway on the
Repurposing Strategy.



5. Appointment of external reviewer of Land Bank loan book and full audit process

The Land Bank appointed SNG Grant Thornton to review the appropriateness of provisions against
its lending book (“Provisioning Review”). The Provisioning Review is not intended to replace the full
annual audit, performed by the Auditor General, which is expected to only be finalised in or about
September 2020. The Provisioning Review is expected to be finalised in early July.
6. Solvency position

The Board confirmed that the organization is solvent as 31 March 2020. This confirmation is
however, subject to the finalisation of annual financial statements for the financial year ended
31 March 2020. The impact of the liquidity challenges faced by the Land Bank and the Covid-19
pandemic may result in significant additional impairments in the value of certain investments. The
Board awaits the outcome of an external valuation of its equity investments, the Provisioning Review
and the annual audit, which may result in additional adjustments.



7. Liability maturity information (drawn facilities) as at 31 March 2020

                                                            R’m       % of total

 Less than 3 months                                       9,676             23%
 3 - 6 months                                             4,388             11%
 6 - 9 months                                             1,127              3%
 9 - 12 months                                            1,961              5%
 Total maturities 12 months and less                     17,152             42%

 1 - 3 years                                             10,355             25%
 3 - 5 years                                              5,829             14%
 5 - 7 years                                              5,105             12%
 7 - 10 years                                             2,453              6%
 10 years and more                                          390              1%
 Total maturities 12 months and more                     24,132             58%
 Total                                                   41,284            100%


The information contained in this announcement has not been reviewed or reported on by Land
Bank’s auditors.

17 June 2020



Enquiries
Land and Agricultural Development Bank of South Africa
Ayanda Kanana, Chief Executive Officer
Khensani Mukhari, Chief Financial Officer
Rebecca Phalatse, General Manager: Marketing and Communications – Tel: 074 159 6833

Debt sponsor
The Standard Bank of South Africa Limited, acting through its Corporate and Investment Banking
division (registration number: 1962/000738/06)

Contacts
Ms Natalie Di-Sante Email: Natalie.di-sante@standardbank.co.za Tel: +27 (0) 11 721 6125

Date: 17-06-2020 05:30:00
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