Abil: Moody’s cuts rating to junk grade

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Moody’s Investors Service cut its international rating on African Bank Investments Limited (Abil) to below investment grade on Friday, citing concerns about spiralling bad loans and sending its shares down as much as 10 percent. Abil has been hammered as its target market of low-income borrowers have been squeezed by inflation, high levels of indebtedness and labour strife in the platinum mines, forcing many to default on payments. Abil makes most of its money from unsecured, higher risk, high-interest loans that are not backed by collateral. The bank has traditionally funded itself in the debt markets, which means a downgrade of its bonds to “junk” status could drive up the cost of its international borrowing. But chief executive Leon Kirkinis said the downgrade would not dramatically affect funding costs. “The overall cost of funding for the bank will not change significantly, just because new funding over the next few months will be slightly more expensive,” he said, adding that the bank had “multiple options across many diverse markets” for funding. The shares plunged 6.77 percent to close at R8.40. – Reuters

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