African Bank has means to repay bond

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Johannesburg - African Bank Investments, South Africa’s largest provider of loans not backed by assets, said it will repay investors when a 150 million-rand bond matures tomorrow, after record losses fanned speculation the lender may need to raise funds.

Since issuing the one-year floating rate note at the three-month Johannesburg Interbank Agreed Rate plus 90 basis points, African Bank reported a record first-half loss following write-offs at its furniture unit and increased bad debts.

Moody’s Investors Service cut the lender’s foreign rating a step to Ba1 in May, one level below investment grade.

“Consistent with our practice of settling bonds upon maturity, this bond will be no exception and we have thus planned appropriate cash reserves to do so,” Nithia Nalliah, chief financial officer of the Johannesburg-based lender, said in an e-mailed response to questions yesterday.

While African Bank sold 5.5 billion rand of stock in December to bolster capital, that has been partly eroded by the first-half loss.

The company may need another rights offer of as much as 3 billion rand before bondholders will agree to roll over debt, Kokkie Kooyman, head of Cape Town-based Sanlam Global Investments, said on July 7.

Two African Bank notes of 1 billion rand will mature in September, while 7.7 billion rand of debt and interest is due next year, according to data compiled by Bloomberg. - Bloomberg News

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