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Delay in implementing restructuring plan pushes Land Bank deeper into junk

With Moody’s noting that failure to resolve its liquidity issues could see it downgraded further.
The bank says it will implement the plan once it receives the R7bn allocated to it in the mid-term budget. Image: Ramin Talaie, Bloomberg

Rating agency Moody’s has downgraded South Africa’s Land Bank deeper into subinvestment grade, citing ongoing delays in the conclusion of the state-owned enterprise’s restructuring plan. 

The downgrade follows the recent decision by Moody’s and Fitch to downgrade South Africa further into junk status. Moody’s cut the nation’s foreign- and local-currency ratings to Ba2, two levels below investment grade, from Ba1. Fitch cut them to BB-, three levels below investment grade, from BB.

Both rating agencies maintained a negative outlook for the country’s credit ratings. 

Moody’s cut the Land Bank’s corporate family rating and long-term issuer ratings to Caa1 from B3, and its long-term national scale issuer rating to B2.za from Ba2.za. The outlook remains negative.

‘High risks’

The rating agency said the negative outlook is largely driven by the high risks associated with the implementation of the bank’s restructuring plain and ongoing and protracted period of negotiations with lenders, where the bank continues to default on its payments. 

The delay in implementing the restructuring plan is increasing “the risk and magnitude of potential losses to lenders” Moody’s said in a statement on Tuesday.

The Land Bank, which is currently in a default position, is also dealing with sinking capital following the four previous Moody’s downgrades this year and the impact of Covid-19. The bank cannot access new funding from the market until its default status has been reversed. 

Read: Moody’s downgrades Land Bank deeper into ‘junk’

The majority of its short-term investors require a minimum credit rating of A on the national scale. 

The bank’s restructuring plan includes providing a liability solution for creditors, which aims to cure the current defaults and term out debt maturities of existing debt and bonds. The bank had originally planned to implement the liability solution by the end of November, but announced on Monday that due to the “complexity” of the transaction, the liability solution would only be achieved at the end of March 2021.

The rating agency says negotiations are ongoing, on the possibility of lenders extending the maturity of their bonds in exchange for a partial government guarantee on the newly-issued bonds.

Although no agreements have been reached, the delays “increase both the risk that creditors will suffer economic losses, and the potential magnitude of such losses,” Moody’s said.

This year the bank received a R3 billion cash injection from the government after it defaulted on its payments. It was allocated a further R7 billion in the October medium-term budget. The details of this further cash injection are expected in the February 2021 budget. 

Land Bank spokesperson Rebecca Phalatse told Moneyweb on Tuesday that once October’s allocations are given to the bank, it will be able to fully “cover the ground”and implement its restructuring plans. 

Moody’s said the bank could be further downgraded if it fails to resolve its liquidity issues and implement its restructuring plan on time “such that creditor recovery rates are lower than those assumed at the current rating level”.

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The ANC has made all SOEs and related entities into junk.

Faster you evil excuses, faster to the censorship of the master race

COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 6:06 PM
Try this stuff..
COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 6:04 PM
COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 6:03 PM
COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 6:01 PM
COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 5:58 PM
COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 5:55 PM
COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 5:48 PM
The bias toward the minority view is most certainly the preference of this website..

COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 7:55 AM
Moneyweb is evidently employing the new advanced style of censorship? Comments that are too difficult for the admin bot to categorize are simply held indefinitely?
COMMENT HELD FOR MODERATION
28 NOVEMBER 2020 @ 5:36 PM
Agree about the biggest issue being further pandemic reactions. Dems want lockdowns until vaccinations completed = success for economic suicide and vaccine merchants. But now there is a truth leak that must surely sprag the vaccine merchants and scuttle the prospective bargain business acquisition targets. A high level analysis of the US Covid-19 deaths reveals errors that reduce these numbers into non-existence. https://www.aier.org/article/new-study-highlights-serious-accounting-error-regarding-covid-deaths/
All hands on deck to fix the leak and PR it into river? You bet.
The acceptance of this analysis will have global repercussions.
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Being a victim of raw and blatant evil-minded totalitarian supporting scum of the earth is not
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Yaaa.

In a previous article the Landbank said the drought was partly to blame for their failure.

The maize crop was up by 38%??

We all know what the problem is and seemingly so does the ratings agencies.

Useless!!!!

Just another ANC brick in the road leading to communist Nirvana.

The coronavirus is a non-event compared to the contagion that could spread from a debt default at the land bank. The number of the resulting casualties will be a multiple of the covid deaths.

The collapse of this SOE will starve the formal agricultural sector of production loans. Farmers will be unable to purchase seed, fertilizer, diesel, chemicals and labour. Crops yields will suffer, production will decline, the cost of basic foods like maize meal will double as the price trends towards import parity. If the farmers fail to produce a full crop, they won’t be able to service their bonds at the commercial banks. Commercial banks will foreclose, putting pressure on land values, destroy the value of collateral, leading to more foreclosures. Eventually, the problem at the Land Bank will be transferred to the balance sheet of commercial banks.

This vicious circle of events was started when an ignorant and shortsighted populist politician deployed an ignorant and criminal cadre to a crucial SOE and forced him to make uncollateralised loans to unproductive emerging farmers. It is by this formula that many African governments inadvertently use famine to control the size of their populations.

We should put the ANC in lockdown if we want to save lives.

“It was allocated a further R7 billion in the October medium-term budget. The details of this further cash injection are expected in the February 2021 budget”

the above sentence out of the article just shows once again – 7 billion is allocated by the anc government, but to date, who knows for what – it should be the other way round – the landbank’s budget shows a shortfall of cash for certain expenses / creditors and this is how the 7 billion will be used – not “when landbank got 7 billion, let them then decide how it is going to be spend” – that is like giving the greenlight to landbank to continue as usual with “business”

That’s why the Landbank default is such an interesting case and why there’s a large audience paying attention to how it’s handled. It tells people how the upcoming defaults are going to be handled by the government.

Every comment suggesting the Land Bank is yet another ANC failed SOE like the rest indeed are, is based on ignorance about the highly skilled board and management of the board; unlike the rest of the SOEs, the bank does not fall under Public Enterprises, but under Treasury.
Political “interference” manifests only in the bank’s mandate that forces it to allocate a minimum percentage of its loanbook to small-scale farmers and farming enterprises. The issue is a mismatch between short-term and long-term loans to different enterprises – both commercial and small-scale, giving rise to an unsustainable lending scenario. But in principle the bank is far more essential than a national airline, for instance, if government is serious about fighting rural poverty and unemployment!
The bank had been solvent for many, many years but this was scuppered two years ago due to more recent changes to its mandate regarding small-scale farm operations; ongoing severe drought in many parts; planned expropriation without compensation; and multiple sovereign downgrades. A year ago the bank itself was downgraded one notch for the first time.
Expropriation without compensation is one of the biggest threats the bank faces, the same as all commercial SA banks that are operating in a highly anti-investor friendly climate. But the board and management cannot be faulted!

Land Bank? had anyone that has a job and pays tax ever used it?

Do we need it?

If it is not profitable or viable then close it like.

I suppose jut a pipe dream, the tax payer will also pay for this one.

End of comments.

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