African Bank plans to repay debt investors

After the company reported a record first-half loss.

African Bank said it will repay investors when a R150 million bond matures tomorrow, after record losses fanned speculation South Africa’s largest unsecured lender may need to raise funds.

Since issuing the one-year floating-rate note at the three- month Johannesburg Interbank Agreed Rate plus 90 basis points, African Bank reported a record first-half loss following write- offs at its furniture unit and increased bad debts. Moody’s Investors Service cut the lender’s foreign rating to Ba1 in May, one step below investment grade.

“Consistent with our practice of settling bonds upon maturity, this bond will be no exception and we have thus planned appropriate cash reserves to do so,” Nithia Nalliah, chief financial officer of the Johannesburg-based lender, said in an e-mailed response to questions yesterday.

While African Bank sold R5.5 billion of stock in December to bolster capital, that has been partly eroded by the first-half loss. The company may need another rights offer of as much as R3 billion before bondholders will agree to roll over debt, Kokkie Kooyman, head of Cape Town-based Sanlam Global Investments, said on July 7.

Two African Bank notes of R1 billion will mature in September, while R7.7 billion of debt and interest is due next year, according to data compiled by Bloomberg.

African Bank shares fell 0.4% to R6.77 as of 12:43 p.m. in Johannesburg. The yield on its 2018 Swiss franc bond rose 1 basis point to 8.33%.

©2014 Bloomberg News

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