JOHANNESBURG - African Bank announced that it has bought back bonds with a nominal value of R2.019 billion, issued under its Domestic Medium Term Note (DMTN) programme, by way of a public offer.
This comes as the bank had offered to buy back up to R3.2 billion of its rand denominated bonds issued under its JSE-listed DMTN programme earlier this month.
The rationale was to save on interest costs that African Bank needs to pay on the bonds held, thus improving the financial result for future years, while structuring the bank's balance sheet more effectively from a capital and liquidity perspective.
Since July 2016, the bank has bought back over half of its US dollar and Swiss franc debt issued under its Euro Medium Term Note programme listed on the London stock exchange, as well as a portion of unlisted bilateral ZAR deposits.
African Bank's public offer to domestic bondholders, to buy back any or all shorter-dated domestic bonds maturing before May 2019, was opened to the local market last week and closed on Thursday.
This R2.019 billion buyback represents 62% of the bonds included in the initial invitation and adds to other buybacks concluded to date.
Group treasurer, Gavin Jones, said that the offer would reduce the bank’s domestic liabilities and contribute to a reduction in the interest expense line.
"We believe that the offer provided a good balance between offering existing bondholders an opportunity to monetise their holdings at a decent return and providing the bank an opportunity to further right size its balance sheet and eliminate negative carry," Jones said.
"This successful offer reduces the bank’s domestic liabilities by some R2 billion and will contribute to a reduction in the interest expense line, which will further enhance the banks future earnings."