South African central bank rides to the rescue of stricken lender
TROUBLED South African lender African Bank Investments (Abil) was yesterday chopped up into a good bank and bad bank by authorities in a bid to rescue the stricken lender.
The South African Reserve Bank (Sarb), the country’s central bank, placed the lender under creditor protection while it raises more funds. A 940m rand (£560m) capital raising round will be used to rebuild the good bank’s finances while the central bank will take on Abil’s 17bn rand portfolio of bad loans. Banks including Barclays Africa and FirstRand will underwrite the capital issuance.
Abil raised 5.5bn rand in a rights issue last December, run by Goldman Sachs, but the funds failed to end the bank’s troubles, sparked by a clutch of bad loans.
Its shares dived 95.4 per cent last week, and the bank’s chief executive Leon Kirkinis resigned.
Senior bondholders will keep their investments in the good bank, losing 10 per cent of their investments under the Sarb plan.
Shareholders and junior bondholders may keep a smaller investment in the good bank.
Sarb governor Gill Marcus said: “This is something that is not done lightly. There is a private (and) public sector responsibility, given the nature of African Bank and its clients and its role.”
Abil’s collapse comes just weeks after a similar deal was struck to save chunks of Portuguese bank Espirito Santo.