DURBAN - CASH-STRAPPED Land Bank of South Africa has been downgraded by Moody’s on restructuring delays and a related liability solution.
Moody’s slapped the agricultural development financier with a Caa1 from B3, and its national scale issuer ratings to B2.za from Ba2.za.
The rating agency also downgraded Land Bank’s Baseline Credit Assessment to Caa3 from Caa2, a move which makes it more expensive for the bank to borrow funds.
The Land Bank had failed to make payments of maturing credit facilities in April.
“The successful conclusion of Land Bank’s liability solution, in a way that creditors suffer no material losses, will place positive pressure on the ratings,” Moody’s said.
“The implementation of a viable and credible strategy for the future will also, over the medium term, have further positive rating implications.”
Moody’s said the bank’s outlook remained negative, driven by the high implementation risks in Land Bank’s restructuring plan.
The state-owned bank has asked the National Treasury for R7 billion to go towards reducing its debt, as part of the proposed liability solution.
In August it resumed interest payments after the state gave it R3bn.
Sydney Soundy, the bank’s executive manager for strategy and communications, said liquidity constraints had resulted in an inability to effectively offer the full financing needs of its current and new clients.
He said the bank was experiencing liquidity challenges and had since embarked on a process to find solutions with its funders/lenders with the support of the shareholder.
“The Minister of Finance and the National Treasury have supported the bank as far as possible. In the current financial year (2020/21) the National Treasury allocated an amount of R3bn to Land Bank, received in September. In the Medium-Term Budget Policy Statement on October 28, the minister acknowledged Land Bank’s request for further shareholder capital injection support for 2021/22 – 2023/24. We look forward to the confirmation of the support as part of the Budget Speech in February 2021,” said Soundy.
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