SOUTH AFRICA – Land and Development Bank of South Africa (Land Bank), government owned development bank and the biggest lender to farmers in the country has revealed that it will default on yet another set of interest payments and debt that are due this month.
This comes as the bank is currently seeking R3 billion (US$167m) loan financing from some of its creditors.
The liquidity-constrained finance institution defaulted on some of its debt that was due towards the end of April, triggering a cross default on a R50 billion (US$2.7 billion) bond programme worsening an already dire cash flow situation.
According to reports by Fin24, the state-owned lender, has indicated that it is not in a position to proceed with the R119.8 million (US$6.8m) interest and R200 million (US$11.5m) principal payments due between 22 and 26 June 2020.
The Land Bank’s liquidity problems have become so severe that it is even reliant on the R3 billion (US$167m) it hopes to raise in the next two weeks to pay out some loans it approved to farmers.
It has since appointed Rand Merchant Bank (RMB) as financial advisor to come up with cash-flow projections for the Bank, deliver a strategic plan and assess its viability.
A process on its liability solution is underway, which is due to be concluded on 31 August, although timelines are subject to change, it said.
The liability solution is aimed at addressing the cross defaults, extend the term of all funding that has matured or will mature in the next 12 months to develop a “more sustainable” maturity profile.
The process for an equity solution is also underway – to determine the additional equity required to recapitalise the bank. This process will take into account the work of the repurposing strategy, which is due to be finalised at the end of September.
An external reviewer SNG Grant Thornton has been appointed for its loan book. This provisioning review is due to be finalised in early July, but does not replace the full annual audit by the Auditor General, it said.
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