Johannesburg - African Bank announced on Tuesday that it was one step closer to its stated intention of creating a “good bank” out of its toxic assets after the Banks Act Amendment Bill was signed into law with effect from June 29.
South Africa’s Reserve Bank put the mass market lender under curatorship in August last year after it almost collapsed under the weight of heavy losses from granting unsecured loans to low-income borrowers.
Tom Winterboer, the curator, outlined a proposal to create a “good bank” from the bad one, subject to a number of conditions, including agreement being reached with creditors, the signing of the Bank Amendment Act and the granting of a new banking licence by the South African Reserve Bank.
Earlier this year, Winterboer said the bank had received the go-ahead from creditors to split its good loans from its toxic assets. He said that both senior unsecured debt holders and subordinated debt holders had agreed in principle to the bank’s restructuring proposal.
Senior unsecured debt holders will have 90 percent of their claims exchanged for new unsecured notes in the lender’s “good bank” and the rest as residual securities in African Bank.
Subordinated creditors can have their claims, totalling R4.4 billion, converted into equity or exchanged for a combination of notes in the good bank and subordinated residual debt instruments.
A statement from the bank on Tuesday said that the Bank Amendment Act, which significantly widens the powers of the curator of a distressed bank, as well as his obligations towards creditors and shareholders, had now been signed into law.
Winterboer had earlier said he expected the new bank to be operational by the beginning of October. Tuesday’s statement said he was not yet able to confirm the timing.
ANA