Land and Agricultural Development Bank in a liquidity crisis

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CAPE TOWN –  The Land and Agricultural Development Bank, which is owned by the government, said it anticipates defaults to occur under debts which fall due today, due to a liquidity crisis at the bank.
The Land Bank warned in a statement also that it might be unable to pay some R738 million of indebtedness that is scheduled to mature between today and the end of the month.
The bank said it is engaging with various stakeholders to address the challenges, especially in regard to financial obligations falling due  which may need to be deferred.
On Monday the bank said it was unable to repay a revolving credit facility, and it warned of potential defaults on payments on its R50 billion bond programmes.
The Land Bank said yesterday its legal counsel had reconsidered their analysis, and concluded that the amount repayable under the revolving credit facility did not constitute a default under the notes programmes, however a default might occur for debts that fall due today.
The Land Bank said it had approached certain lenders and was in the process of approaching the remaining funders to the Land Bank to possibly raise up to R5bn to meet the Land Bank’s medium term liquidity requirements. 
The Land Bank said it 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 financial indebtedness, the Land Bank will be engaging the noteholders and other funders to agree to a deferral of the payment of interest and capital
repayments for a period to be agreed with the noteholders and funders.”
National Treasury said Monday 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, 2020, the National Treasury approved R5.7bn of government guarantees for the Land Bank. 

By Edward West


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