Johannesburg - African Bank [JSE:ABL] has been placed under curatorship with effect from 16:00 on Sunday August 10 2014, the SA Reserve Bank (Sarb) announced on Sunday afternoon. Sarb in consultation with the Minister of Finance, has decided to implement a number of support measures, said Sarb governor Gill Marcus. This will further strengthen the resilience of the banking system as a whole, and, importantly, they These will further strengthen the resilience of the banking system as a whole, and, importantly, they will provide African Bank with the best chance of a viable future. According to Marcus the curatorship and resolution process will ensure that the regular operations and collections of Abil continue effectively and efficiently. It will also identify performing loans and positive assets to be maintained in a good bank. Sarb will purchase a substantial portion of the non- and under-performing assets and other high risk loans from Abil in order to separate them from the good bank, said Marcus. She said a new entity created in the process will be recapitalised by a capital raising of some R10bn underwritten by a consortium. In this way current shareholders will get an opportunity to participate in the recapitalisation of the new entity. Abil split into two parts The resolution of Abil will see the bank split into two parts. On the one hand a good bank, which will be recapitalised. Let me emphasise here that the R10bn recapitalisation is for the good bank, which has a book value of R26bn net of portfolio impairments, said Marcus. On the other hand, the bad book, which comprises a substantial portion of the non- and under-performing assets, will be housed in a vehicle with the support of the Sarb in order to separate these from the good bank. As a result, the bad book will no longer form part of Abil. The bad book currently has a book value net of specific impairments of R17bn for which the Sarb will pay R7bn. Collection against the bad book will be continued, and indeed strengthened: There is no payment holiday for anyone owing on a loan from African Bank, said Marcus. Abils board does not oppose curatorship and has taken the appropriate resolutions to facilitate the process. The minister has appointed Tom Winterboer of PwC as the curator. He will be responsible for African Bank with immediate effect. The curatorship is a protection procedure which gives Sarb the legal means to create the necessary space to implement a resolution plan capable of ensuring that the business of Abil gains a secure perspective for the future as a lending institution with a transformed business model, said Marcus. The measures that have been taken are, in our view, in the best interest of all stakeholders, whether depositors, shareholders, creditors or clients. Retail depositors Retail depositors represent less than 1% of Abil’s creditors. We are, therefore, able to make an unequivocal commitment to all existing retail depositors that their money is safe and that they can continue with African Bank as their bank without fear that their deposits will be frozen or lost, said Marcus. They will have full access to their money in the ordinary course of business. Big question On Friday the big question for investors was whether Sarb would intervene to soften the impact on the financial sector should Abil collapse. Sarb even issued a statement last week to assure investors that the rest of the banking sector is fine. There was concern about what the impact wold be should Abil collapse and becomes unable to repay its creditors. Professional investors had lent Abil about R54bn, of which about R30bn came from SA asset managers, Rapport reported on Sunday. The Industrial Development Corporation, the second biggest shareholder in Abil, indicated on Friday that it is worried about the impact a collapse of Abil would have on the industry. Leon Kirkinis, co-founder of Abil, resigned with immediate effect on Wednesday. - Fin24
Posted on: Sun, 10 Aug 2014 14:57:49 +0000