Mixed reactions to African Bank relaunch

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Complex restructuring process

“The commencement of the new African Bank represents the culmination of the restructuring announced by the South African Reserve Bank (SARB) in August 2014. We are delighted at the overwhelming support received from the creditors for the restructuring of the bank and now hand the baton over to the new board of directors and management team of the new African Bank, wishing them every success,” says PwC curator, Tom Winterboer.

Following problems within the African Bank Investments Limited group of companies, PwC worked to develop a restructuring proposal that was accepted by the SARB and leading banks of South Africa.

While under curatorship, a considerable amount of time was spent on the restructuring proposal, including steps to amend the Banks Act to provide necessary flexibility and engagement with affected creditor groups.

This included publishing the detailed restructuring plan for comment in September 2015, following the changes to the legislation. Engagement with creditor groups culminated in over 95% of them electing to accept the proposed restructuring terms.

Winterboer says: “The curatorship and restructuring of African Bank has been an extremely complex and arduous process with a number of challenging legal, regulatory and financial processes and matters.”

Investors hold back

Although it’s still very early days, investors seem to have adopted a wait-and-see approach, and according to a report on Fin24, some remain sceptical as to the restructured bank’s success.

“The current spreads are inadequate and they might blow out significantly when they start trading. The increased term isn’t necessarily compensated for, or the bad economy, or the new management team. The coupons are below where we see value,” Wafeeqah Mallick, credit analyst at Cape Town-based Futuregrowth Asset Management, one of the senior debtholders that was swapped into the new notes, says in the article.

While another says that his company would definitely not be looking to buy any African Bank debt as there is still so much uncertainty surrounding the bank.

Part of the restructure includes a greater spread of risk from African Bank’s former one-channel unsecured loan model. The bank is planning to launch a series of new insurance and lending products, as well as to venture into transactional banking.