African Bank Investments Ltd. said it will repay investors when a 150 million-rand ($14.3 million) bond matures tomorrow, after record losses fanned speculation South Africa’s largest unsecured lender may need to raise funds.
African Bank issued the one-year floating-rate note at the three-month Johannesburg Interbank Agreed Rate plus 90 basis points last July. Moody’s Investors Service cut the lender’s foreign rating to Ba1 in May, one step below investment grade, after it reported a record first-half loss.
The repayment is “consistent with our practice of settling bonds upon maturity,” Nithia Nalliah, chief financial officer of Johannesburg-based bank known as Abil, said in an e-mailed response to questions yesterday.
The lender’s capital requirements have declined as its business has shrunk, said Bruce Stewart, head of debt origination at Nedbank Capital in Johannesburg.
“In the normal course of business, you would expect Abil to replace the bond or issue new debt,” Stewart said by phone today. “If Abil can calm the troubled waters, it will be in a reasonable position next year and then it won’t be a problem at all to roll the debt.”
African Bank shares fell 1.2 percent to 6.72 rand as of 4:23 p.m. in Johannesburg, bringing this year’s decline to 44 percent, the second-worst performance on the benchmark FTSE/JSE Africa All Share Index of 164 companies. The yield on its 2018 Swiss franc bond rose 5 basis point to a record 8.37 percent.
While African Bank sold 5.5 billion rand of stock in December to bolster capital, that has been partly eroded by the first-half loss. The company may need another rights offer to raise as much as 3 billion rand before bondholders will agree to roll over debt, Kokkie Kooyman, head of Cape Town-based Sanlam Global Investments, said on July 7.
African Bank has sold an average of nine bonds a year for the past four years, according to data compiled by Bloomberg. This year it has only issued two notes, the last one in March.
Two African Bank notes of 1 billion rand will mature in September, while 7.7 billion rand of debt and interest is due next year, according to data compiled by Bloomberg.