Renee Bonorchis
THE LACK of information about African Bank Investments Limited (Abil), which collapsed in August, is unsettling investors who stand to lose everything if it cannot be rescued.
The silence “increases investor uncertainty and stimulates the concern”, Jean Pierre Verster, an analyst at 36ONE Asset Management, which holds stock in the Johannesburg-based company, said last week.
“We don’t know what’s happening with their disbursements, loan book growth or shrinkage, bad debt emergence or any other financial information required to make an informed decision regarding participation in the expected capital raising.”
Abil, as it is known, last gave a public update on December 10.
Its financial full-year results to September, initially scheduled for release in November, have not been published.
The administrator of the failed bank, who is trying to rescue its so-called good assets, planned an initial public offering (IPO) by March.
That has been indefinitely delayed as lawmakers try to pass contested legislation governing bank collapses.
The Banks Amendment Bill was introduced last year.
It envisages giving administrators of failed lenders the right to sell their assets and liabilities and change capital structures without consulting investors.
It would also allow the creation of “super senior” priority investors, such as the central bank, to help bail out floundering banks.
Investec Asset Management and Stanlib Asset Management, both based locally, were among fund managers who told lawmakers on February 4 that they opposed the changes.
‘Unhappy clients’
“Until Abil is resolved, we have a lot of clients who are unhappy,” Thabo Dloti, the head of Liberty Holdings, which owns Stanlib, said last week.
“The legislation is causing delays. It’s putting Stanlib under enormous pressure.”
An external spokeswoman for Abil said on Thursday that the lender planned to update the market tomorrow.
She declined to comment further.
The lender collapsed in August because of record losses and a lack of funding.
The SA Reserve Bank appointed an administrator to try to rescue the good assets.
“No news is bad news and the initial time line was tough and short, but there’s a lack of any real progress,” Simon Brown, the chief executive of investment and trading training website, JustOneLap, said in response to questions.
“The delayed process means it’s tougher than the central bank had hoped or expected.”
Abil’s biggest shareholders include the Government Employees Pension Fund, Coronation Fund Managers and Allan Gray.
Some of the largest holders of Abil debt include Investec Asset Management, Momentum Asset Management and Cadiz Asset Management.
Legal hurdles
“The higher probability of failure, previously underestimated, leads to a longer rescue process,” Verster at 360NE said.
“The delay in the amendment of the act, which would allow the curator to transfer liabilities to a different legal entity at his discretion, is probably the main stumbling block.”
Finance Minister Nhlanhla Nene offered little guidance on Abil when he presented the Budget on February 26, saying only that the bank “is now generating positive cash flows”.
Senior debt holders in Abil expect to lose 10 cents of every rand invested, while other bondholders and shareholders may lose everything unless the rescuers manage a successful IPO of Abil’s “good” assets.
– Bloomberg