Cape Town - African Bank – the bailed out South African lender – on Friday announced an offer to repurchase up to $500m (R7.26bn) worth of bonds from its foreign currency-denominated bond holders issued under its $6bn Euro Medium Term Note programme.
The bank that took on the good loans from the old bank that collapsed in 2014 is not yet listed, but has been recapitalised by the SA Reserve Bank and all of South Africa’s banks with an R10bn injection.
The tender offer is only in respect of the foreign liabilities, which represent a significant portion of the total liabilities issued by the bank and are typically relatively expensive, particularly given the current macroeconomic and foreign currency exchange rate environment.
"The rationale of the tender offer is to reduce the bank's interest expense and thus improve earnings, whilst maintaining strong liquidity and improving the regulatory capital position,” said African Bank group treasurer Gavin Jones on Friday.
“A successful tender offer will reduce the strain of a negative interest margin caused from the surplus cash and right size the balance sheet to support our strategic objectives over the medium to long term,” he said.
African Bank has a total of CHF 432m and $549m outstanding foreign debt, having already repurchased certain of these bonds in the open market.
On June 28, African Bank announced its unaudited interim financial statements for the six months ended 31 March 2016.
“The financial statements reflect the injection of R10bn of share capital into the bank prior to the reporting date, and associated interest earned on that cash until 31 March 2016.
“The results do not reflect any operational updates as the bank was launched after the reporting date.”
The previous African Bank Limited that was successfully restructured on 4 April 2016 into the new African Bank Limited with the previous African Bank now having been re-named Residual Debt Services Limited.
The new African Bank is a 100% subsidiary of African Bank Holdings Limited. ABHL is an unlisted, registered bank controlling company under the Banks Act.
The shares in ABHL are privately held by the SA Reserve Bank, the Government Employees Pension Fund, Barclays Africa, Nedbank, FirstRand Bank, Investec, Standard Bank and Capitec.