RMB appointed financial adviser for Land Bank creditors
The Land Bank purportedly missed a loan repayment that triggered a cross-default in notes issued under a R50bn bond programme
Creditors of the biggest lender to SA farmers have picked Rand Merchant Bank (RMB) as financial adviser after it missed a loan repayment that triggered a cross-default in notes issued under a R50bn bond programme, according to people familiar with the matter.
RMB has been entrusted with the task of drawing up cash-flow projections for the Land and Agricultural Development Bank, the people said, asking not to be identified as an announcement hasn’t been made.
RMB — a unit of FirstRand, Africa’s largest lender by market value — must also deliver a strategic plan for the state-owned bank and assess its viability, they said.
The 108-year-old bank, which supplies about 30% of loans in the agricultural industry, failed to make repayments on a revolving credit facility in April, triggering the default event on R13.8bn of debt, according to data compiled by Bloomberg.
It has since said it is seeking a one-year deferral of interest and capital payments. Negotiations are ongoing and an appointment may only be finalised by Friday, a representative for the Land Bank said without naming any companies.
RMB declined to comment, citing its policy not to disclose advisory appointments until their clients announce them. The default highlights the parlous state of state-owned entities (SOEs) after years of mismanagement and, in some cases, corruption.
SAA is bankrupt; arms maker Denel couldn’t make pension or tax payments for its employees in May; and power utility Eskom isn’t generating enough profit to cover its costs, which include interest payments on R454bn of debt.
The SA Reserve Bank this week temporarily suspended Land Bank bills as a high-quality liquid asset, which means banks and investment firms cannot use their Land Bank debt as collateral at central bank auctions.