Johannesburg - African Bank Investments Ltd’s largest shareholder, Coronation Fund Managers Ltd, apologised to investors and said it had learned a “sobering lesson” after its stake in the failed lender was wiped out.
South Africa’s central bank put Abil, as it’s known, into curatorship, akin to Chapter 11 bankruptcy, on August 10 after the lender said it needed at least 8.5 billion rand of capital to survive.
Abil’s shares were suspended on August 11 after the South African Reserve Bank split it into a “good” bank and a “bad” book, and arranged for institutions to underwrite a 10 billion-rand capital-raising exercise.
Coronation held about 22 percent of Abil before the company gave its trading update on August 6 that precipitated a more than 90 percent decline in the stock value, according to data compiled by Bloomberg.
The Cape Town-based fund manager then cut its holdings to less than 9 percent by August 8, it said.
“Losses have been incurred, for which we apologise,” the money manager, which manages the equivalent of about $54 billion (R573 billion), said in an e-mailed statement.
“This has been a humbling experience for us. We do not like to make mistakes.”
Still, African Bank’s meltdown didn’t have a significant impact on the performance of any of the funds with exposure, Coronation said, without disclosing how much it lost in rand terms.
Top 20 Fund
African Bank accounted for 1.4 percent of Coronation’s Top 20 fund, which lost 0.2 percent from August 1 to August 11 compared with a median competitor loss of 0.1 percent, according to the money manager, which cited August 12 data from Morningstar.
Coronation’s Balanced Plus fund, where African Bank accounted for 0.53 percent of assets before the lender’s August 6 trading update, lost 0.6 percent during the period compared with 0.7 percent for competitors, the money manager said.
African Bank long-term deposit and senior unsecured debt rating was lowered to Caa2 from Ba1 by Moody’s Investors Service yesterday, citing the “expected losses” for senior bondholders and wholesale depositors.
The bank is on review for a possible downgrade because of the risk of higher than anticipated losses.
“Equity holders, preference shareholders and subordinated debt holders will lose all their capital,” Coronation said.
Coronation’s share price, which gained 24 percent this year before Abil’s August 6 trading statement, fell 6 percent to 93 rand as the lender collapsed last week.
It’s since made up losses, gaining 1.1 percent to 97.76 rand as of 9:52 am in Johannesburg trading, compared with 99.11 rand on August 5
The Public Investment Corporation, Abil’s second-largest shareholder, hasn’t disclosed losses, while Stanlib, Abil’s third-biggest shareholder ahead of the collapse, hasn’t responded to phone calls and messages.
Fifteen months before African Bank’s rescue this week, David Stemerman told his fellow US hedge fund managers to bet against the South African lender.
Stemerman, founder of $3 billion Conatus Capital Management LP, told a New York hedge-fund conference that African Bank had become vulnerable after aggressively building up its unsecured consumer lending investments and becoming too reliant on financing from the bond market. - Bloomberg News