African Bank’s New Junior Debt Offers Highest Rate Among Lenders

The subordinated debt African Bank Investments Ltd. plans to issue will offer the highest interest rate of any comparable instrument from a bank in South Africa.

“The applicable floating interest rate will be the three-month Johannesburg Interbank Agreed Rate rate plus 7.25 percent,” the lender, which failed in August amid record losses and a lack of funds, said Friday in a statement. A single instrument totaling 1.65 billion rand ($136 million) will trade on Johannesburg’s stock exchange, it said.

Three-month Jibar is trading at 6.1 percent, giving African Bank’s planned instrument an interest rate of 13.35 percent, the highest on offer among South African banks. By comparison, Standard Bank Group Ltd.’s similar instruments were offered this week at three-month Jibar plus 350 basis points, or 3.5 percent. African Bank agreed to settle 37.5 percent of subordinated debt holders’ claims through the new issue.

African Bank administrator Tom Winterboer, seconded from PricewaterhouseCoopers LLP, is trying to rescue the lender’s viable assets and place them within a new entity referred to as a good bank.

“Existing Tier II debt holders in African Bank will be allocated a portion of the good bank Tier II instruments, amounting to 1.65 billion rand, in the proportion to which their African Bank claim, including accrued and unpaid interest, relates to the total African Bank Tier II claims,” the lender said in its statement.

The new debt will be issued on the day the good bank starts operating, Gavin Jones, African Bank’s treasurer, said Thursday in an e-mailed response to questions. That should be before the end of the year, he said.

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