JOHANNESBURG – At the conclusion of its business rescue process, African Bank Investments Limited (Abil), the former parent of failed African Bank, has paid creditors in full and has cash reserves of R250 million, it announced on Wednesday.
“The board of directors of Abil announce the successful implementation of the adopted business plan and the end of business rescue proceedings,” Abil said in a statement.
“As a result of the successful business rescue process the company is no longer distressed and can continue to operate as a going concern,” explained former business rescue practitioners (BRP), John Evans and Dawie van der Merwe.
Abil was placed into business rescue in June 2015 following the failure of its subsidiary, Ellerine Furnishers to repay loans to large South African banks for which Abil was the guarantor.
According to the business rescue plan, Absa was owed R93 million, FirstRand was owed R157 million, Investec was owed R93 million and Standard Bank was owed R23 million.
African Bank, as represented by its curator at the time, Tom Winterboer, was owed R447 million.
In terms of the adopted business rescue plan, Abil set aside funds to pay all of the company’s creditors in full “to the tune of R1 billion”, according to the statement.
After paying these creditors, it has cash reserves of R250 million.
Its ability to pay creditors was largely a function of insurer Stangen, of which Abil is the sole shareholder and which had reported equity of R1.1 billion at September 2015.
Dividends received from Stangen are Abil’s primary source of income.
The original business rescue plan was to sell Stangen to the newly constituted African Bank, which launched last month. This deal fell through last year following court action by Abil’s BEE shareholders, who felt that the purchase price of R1.4 billion was too low.
Stangen remains a very successful business, according to Van der Merwe, with a funeral cover book separate from African Bank, and is excellently placed to grow.
Even though the business rescue process is now complete, the former BRPs will continue to manage Abil’s assets on behalf of the board.
This is to ensure an “orderly handover” to the new board and the still to be appointed executive directors of Abil, according to the statement.
“The former practitioners will continue to assist the board to compile and publish the company’s interim results by the end of June and to convene an AGM as soon as possible thereafter,” the statement said.
Abil shareholders will, at the AGM, vote on the appointment of a new board and a company name change.
“We believe we have succeeded in an optimal outcome for Abil’s creditors without jeopardising the future of the company. Our ongoing involvement will also provide continuity in the coming months until a new board is constituted following the AGM,” Evans said.
Commenting that business rescue is not a tool for shareholders to recover capital – but rather to address a company’s financial distress, i.e. indebtedness to creditors – Van der Merwe added, “The company has now been returned to solvency and the shareholders and its board are now responsible for its future direction. Whether that is a return of capital by way of dividends, capital restructuring or a new strategic direction for the company, is for the board and shareholders to determine.”
“It is obviously the ultimate intention to have the suspension lifted and for Abil shares to trade normally on the JSE,” Van der Merwe said.