Land Bank has warned those holding R50bn of its bonds that is is now in default, after failing to pay its obligations this week.

The bank warned on Thursday that it was at risk of a default, but had not yet reached the threshold required to formally trigger this.

This has now occurred, the bank said on Friday, meaning that after defaulting on some of its debt, default provisions for its other debt are now triggered.

The default affects the bond holders’ groups 2010 R20bn note programme, and its R30bn 2017 programme.

On Thursday, the bank said it expects defaults to occur on about R738m of obligations that fall due between Thursday and the end of April.

Land Bank said it is engaging with lenders with an eye to postponing payments. Futuregrowth, which says it is historically a significant funder of the bank, has said it is open to engaging with the embattled state-owned enterprise.

“As a key partner in development finance in SA for more than 20 years, and as a significant funder, historically, of Land Bank, we will endeavour to work with it to support it through this challenging period, insofar as this can be done while honouring our fiduciary duty to our clients,” Futuregrowth said.

According to Futuregrowth analysts, the management turnover at Land Bank directly contributed to the default.

Among other factors, there has been a deterioration of the bank’s loan book, largely due to adverse environmental factors, including drought in many parts of SA.

According to Absa analysts Sivenathi Marwarwa and Darshak Juta, credit-ratings downgrades and governance challenges have likely unsettled investors.

In the last quarter of 2019, Land Bank had to cancel its bond auction from which it planned to raise up to R1bn. The cancellation of the auction was on the back of governance challenges that culminated in the departure of acting CEO Konehali Gugushe, the analysts said.

In January, Moody’s Investors Service downgrade Land Bank to junk status.

Update: April 24 2020 
This article has been updated with comment and information throughout.


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