JOHANNESBURG – The Land Bank yesterday scored the first tranche of its government equity injection as it moved to assure investors that it was making progress on the restructuring of its mounting debt.
The struggling agricultural development and agro-business lender received half of the R3billion it asked for to pay creditors.
The National Treasury confirmed the allocation to recapitalise the Land Bank.
The bank sought an emergency liquidity bridge facility while its restructuring plans were being finalised.
“The National Treasury will transfer the R3bn equity injection to Land Bank as announced in the Adjustments budget, thus the Land Bank no longer needs the R3bn liquidity facility that was going to be new debt from a group of lenders,” the Treasury said.
Earlier this year, the bank defaulted on its Domestic Medium-Term Note (DMTN) R50bn debt due to liquidity constraints after Moody’s downgraded its bonds to junk status.
Moody’s cited the bank’s deteriorating financial position, a constrained agricultural sector and fiscal constraints that may reduce financial support.
The downgrade led to a significant liquidity shortfall, as numerous investors did not refinance debt.
Despite government guarantees of R5.7bn in February, the Land Bank could not raise adequate funding and defaulted on its debt obligations on April 1. This triggered a cross default on the bank’s other bonds, forcing the bank to warn holders of R50bn of its debt that it had defaulted on a revolving credit repayment while it was negotiating a payment waiver.
Last week, the Land Bank informed the markets that it would no longer require the R3bn emergency liquidity facility that it was negotiating with certain existing funders.
The bank holds 29percent of South Africa’s agricultural debt.
Land Bank spokesperson Rebecca Phalatse said yesterday that the bank was making progress on the DMTN Programme following the approval and timing of the recapitalisation allocation to the bank.