- State-owned Land Bank has been in default for more than three years.
- The default occurred in April 2020 when the bank defaulted on a loan payment, triggering a cross-default on bond programme.
- Negotiations between the bank and lenders have dragged on for three years, with both parties unable to reach an agreement.
- For more financial news, go to the News24 Business front page.
The Land Bank’s debt default more than three years ago continues to drag on, with Treasury and creditors now examining a fourth proposal, MPs heard in Parliament on Tuesday.
The default occurred in April 2020, when the bank skipped a loan repayment, triggering a cross-default on its R50 billion bond programme. It was the first default by a state-owned enterprise since 1994.
Three proposals to compensate bondholders have been rejected by the creditors’ group.
The specialist agricultural bank aims to support the development of farmers within the agricultural industry to finance land and equipment. Only 58% of the bank’s liabilities have been paid to lenders, with an outstanding debt of R17.1 billion.
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But Land Bank spokesperson Sydney Soundy told News24 that the bank’s financial state had improved, despite the debt default not being resolved. The bank now aims to exit default by the end of the financial year in March 2024.
“The bank is solvent. We are ensuring that we [can meet our mandate] to support the agricultural sector,” said Soundy.
“We need to ensure that lenders are appropriately paid, and we also need to ensure that the solution caters for the bank’s growth,” he said.
In October last year, Land Bank chairperson Thabi Nkosi told Parliament’s finance committee that the organisation had managed to reach an agreement with most of its creditors, and hoped to conclude a settlement by the end of March this year at the latest.
Futuregrowth’s Olga Constantatos said lenders are still awaiting the feedback on the fourth proposal, as negotiations between the bank and lenders have extended for nearly three years.
Futuregrowth Asset Management is the biggest creditor and leads the creditors’ group engagement.
According to Constantatos, there have been various issues with previously proposed liability solutions, including the proposal to split the balance sheet. That was not acceptable to lenders, she said.
When asked whether lenders are concerned about the bank’s financial stability, she said the bank has had borrowers repaying or refinancing their loans and Land Bank has been able to make capital repayments to lenders and provide limited loans to its clients despite its defaulted state.
“The restructure needs to be resolved so that the new CEO and Board can continue with restoring the bank’s sustainability,” said Constantatos.