* Junior creditors had written off their claim
* Senior bondholders to take 10 percent haircut
* It may take “several years” before company floats (Adds executive comment on listing in paragraph 9-10)
By Tiisetso Motsoeneng
JOHANNESBURG, May 28 (Reuters) - Failed South African unsecured lender Africa Bank has offered $137 million to junior creditors in a restructuring plan agreed on Thursday that may please some investors who had not expected to get anything back.
Abil, as the bank is widely known, collapsed under a mountain of bad debt in August last year, forcing the government to appoint external administrators to oversee a restructuring that includes carving out a “good bank” using its healthy assets worth 26 billion rand ($2.15 billion).
Junior creditors, which rank behind other creditors when a company or bank fails, had claims on Abil totalling 4.4 billion rand, the bank said.
Under the restructuring deal, the junior creditors will have 1.65 billion rand of their claim rolled into a new 10-year subordinated bond that will be issued by the “good bank”, which effectively means they will get some money back.
“The fact that there’s a recovery on that debt is a positive,” Bronwyn Blood, fund manager at Cadiz Asset Management, said. “It’s a recovery rate of 37.5 percent on an investment that was completely written off.”
Cadiz holds both senior and junior African Bank debt.
The recovery of the remaining 2.75 billion rand claim from junior debt holders is in doubt, Blood said, because it would depend on the performance of the failed, ring-fenced loan book of African Bank, or the “bad bank.”
The bad loan book portfolio, which contains loans where customers cannot keep up with monthly repayments, is worth 17 billion rand and was acquired by the Reserve Bank in August as part of the rescue plan.
Abil’s senior debt holders will see their bonds assumed by the “good bank” at 90 percent of face value and the maturity of the bonds will be extended by two years.
Junior creditors also have an option of converting their 4.4 billion rand claims into equity, African Bank said. As part of the offer, all creditors have to agree not to make any further claims against African Bank on the old debt.
Abil was scheduled to list the healthy part of its loan book but a senior executive said the company would need more time.
“It is appropriate for the new, restructured African Bank to trade for a number of years in order to build up a track record which will be acceptable to potential investors,” Gavin Jones, Abil’s executive for funding and liability management, said. “We think that may take several years.”
Abil, which has relatively few depositors, has been under outside supervision, led by Tom Winterboer from PricewaterhouseCoopers, since August last year. ($1 = 12.0720 rand) (Additional reporting by TJ Strydom; Editing by David Goodman, Jane Merriman and Susan Thomas)