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Mute rescue plans for unsettle Abil investors

The delay in the amendment of the Banks Amendment Bill is probably the main stumbling block – JP Verster.

The lack of information about the rescue plan for African Bank Investments Ltd., which collapsed in August, is unsettling investors who stand to lose everything.

The silence “increases investor uncertainty and stimulates the concern,” Jean Pierre Verster, an analyst at 36ONE Asset Management, which holds stock in the Johannesburg-based company, said in an interview from the city on Thursday. “We don’t know what’s happening with their disbursements, loan book growth or shrinkage, bad debt emergence or any other financial information required to make an informed decision regarding participation in the expected capital raising.”

Abil, as it’s known, last gave a public update on Dec. 10. Its fiscal full-year results to September, initially scheduled for release in November, haven’t been published. The administrator of the failed bank, who is trying to rescue its so-called good assets, planned an initial public offering by March. That has been indefinitely delayed as lawmakers try to pass contested legislation governing bankcollapses.

The Banks Amendment Bill was introduced last year. It envisages giving administrators of failed lenders the right to sell their assets and liabilities and change capital structures without consulting investors. It would also allow the creation of “super senior” priority investors, such as the centralbank, to help bail out floundering banks.

Investec Asset Management and Stanlib Asset Management, both based in South Africa, were among fund managers who told lawmakers on Feb. 4 they oppose the changes.

‘Unhappy clients’

“Until Abil is resolved we have a lot of clients who are unhappy,” Thabo Dloti, head of Liberty Holdings Ltd., which owns Stanlib, said by phone on Thursday. “The legislation is causing delays. It’s putting Stanlib under enormous pressure.”

An external spokeswoman for African Bank said Thursday the lender plans to update the market on March 3. She declined to comment further. The lender collapsed in August because of record losses and a lack of funding. The South African Reserve Bank appointed an administrator to try rescue the good assets.

Abil’s biggest shareholders include the Government Employees Pension Fund, Coronation Fund Managers Ltd. and Allan Gray Pty Ltd. Some of the largest holders of Abil debt include Investec Asset Management, Momentum Asset Management and Cadiz Asset Management.

“The higher probability of failure, previously underestimated, leads to a longer rescue process,” Verster at 360NE said. “The delay in the amendment of the act, which would allow the curator to transfer liabilities to a different legal entity at his discretion is probably the main stumbling block.”

Finance minister

Finance Minister Nhlanhla Nene offered little guidance on Abil when he presented the national budget on Feb. 26, saying only that the bank “is now generating positive cash flows.”

With the legal wrangling adding to delays in African Bank’s rescue and looming losses for shareholders and debt holders, some investors are determined not to buy into the lender if it does manage an IPO.

“The longer a rescue takes, the less confident depositors and borrowers will be to deal with the bank, and the flow of cash slowly dries up,” Garth Mackenzie, founder of Johannesburg-based, said Thursday. “I would not want to invest in African Bank again, regardless of the outcome. There are safer investments out there.”

©2015 Bloomberg News


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