Johannesburg - African Bank Limited [JSE:ABKI] - not to be confused with African Bank Investments Limited [JSE:ABL] - has announced that it has repurchased $276m worth of bonds from its foreign currency-denominated bond holders, issued under its $6bn euro medium term note (EMTN) programme, done by way of a public tender offer.
In addition to the $49m equivalent that it had repurchased in the open market prior to launching the tender offer, this brings total repurchases of its foreign bonds to an equivalent of $325bn since April 2016.
A foreign bond tender offer was opened to the market by the bank on July 1 2016 and closed on July 13 2016. The structure of the tender offer entailed a fixed price for the Swiss bondholders (traditionally retail investors) and an open offer, with minimum price guidance, to predominantly professionally-managed holders of the dollar bonds.
African Bank Limited repurchased $69m worth of bonds from the dollar bondholders and CHF207m worth of bonds from the Swiss bond holders, totalling an equivalent $276m repurchase.
Given that African Bank Limited had previously repurchased the equivalent $49m of bonds in the open market prior to launching the tender offer, it now has a remaining total of CHF228m and $479m outstanding in terms of its euro medium term note programme.
Group Treasurer Gavin Jones said on Thursday he regards it as a reasonable outcome, given a very supportive global macro-economic environment for emerging market bonds.
"Some bond investors may have been unwilling to sell their investment. This also appears to have been heavily influenced by a clear 'hunt for yield' by investors in a world where low and even negative bond yields are prevalent," said Jones.
"The reduction in the bank's foreign liabilities and the use of a substantial portion of our relatively unproductive holdings of foreign cash, by $325m, will contribute to a reduction in the bank's interest expense and improve our earnings as well as regulatory capital position."
He added that this will also begin the process of re-structuring and right-sizing the take-on balance sheet, which arose as a result of the African Bank restructuring transaction.
A "new version" of African Bank, which was placed under curatorship in August 2014, was launched in April. The bank has kept its previous name and corporate identity. It started doing business with an equity base of R10bn and a cash position of about R24bn.
About two-thirds of the bank’s issued debt was listed on the JSE, the London Stock Exchange and the Swiss Securities Exchange. The remaining third was held in the form of unlisted corporate bilateral deposits.
The intention is for the bank to provide a host of financial products, moving away from its previous business model of unsecured lending to include services such as financial advice.
The bank has just fewer than 400 branches countrywide, apart from digital, direct marketing and contact centre sales and service channels.