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Cash crisis forces the land bank to issue a R738m default warning

Cash crisis forces the land bank to issue a R738m default warning
Soldiers patrol the streets of Soweto, South Africa, Thursday, April 23, 2020 as the country remains in lockdown for a fourth week in a bid to combat the spread of the coronavirus. Africa has registered a 43% jump in reported COVID-19 cases in the last week, highlighting a warning from the World Health Organization that the continent of 1.3 billion could become the next epicenter of the global outbreak. (AP Photo/Themba Hadebe)
CAPE TOWN - The government-owned Land and Agricultural Development Bank yesterday warned its creditors that it might default on some R738 million of indebtedness scheduled to mature by the end of the month as a result of a cash crisis it was experiencing. 

The bank said it was engaging with stakeholders to address the problems, especially in regard to financial obligations falling due that may need to be deferred. On Monday the bank said it had been unable to repay a revolving credit facility, and it warned of potential defaults on payments on its R50 billion bond programmes. 

Yesterday, the lender said its legal counsel had, however, reconsidered their analysis and concluded that the amount repayable under the revolving credit facility had not constituted a default under the notes programmes, but a default might occur for debts that had begun to fall due yesterday. It said it had approached certain lenders and funders to raise up to R5bn to meet its medium-term liquidity requirements. 

The bank currently had access to a R5.7bn government guarantee, of which about R4.3bn remained available, to support capital raising initiatives. “Pending the raising of further funding and the restructuring of its indebtedness, the Land Bank will engage the note holders and other funders to agree to a deferral of the payment of interest and capital repayments for a period to be agreed.” 

The National Treasury said on Monday that it was working on recapitalising the Land Bank, and providing it with further guarantees, but that any further assistance “would have to be accompanied by balance sheet optimisation of the Land Bank to correct the structural liquidity risk embedded in the balance sheet”. In January 2020, the bank sought financial support from the National Treasury in the form of equity recapitalisation as well as government guarantees. This was as a result of the downgrade of the global credit rating and liquidity challenges. In February the Treasury approved R5.7bn of government guarantees for the bank. 

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