Land Bank reaches agreement with lenders

9 September 2024 by Guest

The Board of the Land Bank has announced the successful conclusion of a debt restructuring solution with all its lenders.

At a media briefing in Pretoria on Monday, the bank said official notices have been issued, signalling the implementation of the solution and the bank’s strategic direction moving forward.

The agreement reached with the Land Bank international and local lenders will remedy the bank’s prevailing debt default which occurred in April 2020, said Land Bank Board Chairperson, Thabi Nkosi.

Nkosi said following the signing of legal agreements and the fulfilment of all conditions, the debt restructuring solution will take effect on 16 September 2024, effectively ending the Land Bank’s debt default position.

She said the debt restructuring spans multiple financial instruments of all the bank’s lenders, ensuring equitable treatment of all the lenders, regardless of the type of debt held and their governing laws.

“Scheduled repayments to lenders will occur every six months through to March 2028. The government’s equity contribution will play a critical role in this plan, positioning Land Bank on a sustainable path forward,” Nkosi explained.

Nkosi acknowledged this has been one of the most intricate and extended debt restructuring efforts in South Africa’s financial history.

Coordinating a large number of lenders, including local lenders, a multilateral development finance institution and international banks, as well as the different types of debt instruments, and tenures, added to the challenge.

“Thankfully, all parties showed remarkable patience and good faith with lenders respecting a stand still arrangement since the bank defaulted on its debts. We believe the solution we have reached is in the best interest of all stakeholders and the agricultural sector,” Nkosi said.

Speaking on behalf of government, Finance Minister Enoch Godongwana said government has been concerned about the effect the protracted negotiation process has been having on the bank’s lending activities, which are vital for the socio-economic impact of the bank on the South African economy, and the agricultural sector, in particular.

The Minister said at its prime, the Land Bank contributed R45 billion to the bank’s agricultural debt finance, which represented a share of approximately 28% of the South African farming debt.

Since the debt default the bank has repaid over 60% of its debt. This was achieved through cash proceeds from a deliberate reduction of the bank’s loan book, which reduced from R45.2 billion in March 2020 to R17 billion by June 2024.

Despite the downsizing, Land Bank resumed limited lending activities in October 2022 through the Blended Finance Scheme, which is supported by grant funding from the Department of Agriculture.

“Whilst we were mindful of the bank’s need for state support to assist it to get out of its debt default, we were also cognisant of the fact that a large part of the bank’s debt restructure solution would be driven through the bank’s own initiated remedial measures,” Godongwana said.

Through its own cash flow from collections and client settlements, Godongwana said the bank was able to repay 60% of its funding liabilities since the debt default.

“Government provided R10 billion to stabilise the situation and alleviate the State’s contingent liabilities through the settlement of the State-guaranteed lenders, and to allocate R3.7 billion from these funds towards the Blended Finance Scheme to support the bank’s agricultural development and transformation mandate.

“We also ensured that the bank found self-help measures while keeping fiscal support to a minimum. Moving forward, the bank’s funding model remains a priority,” Godongwana said.

He added that with the liability solution finalised, government wanted the bank to adhere to the pledges set out in its debt restructure agreement and begin a process to address its funding structure so that “we never find ourselves in a similar position again”.

“A closer relationship and collaboration between the bank and the Department of Agriculture, as well all relevant state departments and entities, is required to ensure that coordinated efforts and economies of scale of the State’s entities and the private sector are leveraged to deliver effective impact in the agricultural sector,” Godongwana said.

With the liability solution finalised, the Land Bank is now focused on executing its turnaround strategy to implement its mandate and to drive development and transformation within the agricultural sector.

The bank said the new operating model, led by the CEO and the executive team, with strong board support, “will be central to this journey”. – SAnews.gov.za

GabiK
Mon, 09/09/2024 – 11:40

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