The Land Bank, which last week defaulted on some of its R738 million debt due to mature before the end of April, says it plans to approach its funders to negotiate waiving its current and anticipated defaults, and ask them to help it deal with its liquidity problems instead.
The state-owned lender, which funds emerging, and commercial farmers, said on Monday it is approaching stakeholders to raise up to R5 billion to meet its medium-term liquidity requirements.
“The Land Bank does not have sufficient liquidity to enable the Land Bank to meet its short-term interest and capital repayments across all its funders unless the Land Bank is able to secure sufficient bridge funding. Certain funders have or will be approached to participate in the provision of bridge funding to the Land Bank,” it said in a statement.
This comes after the struggling bank failed to prevent a default on certain of its debt obligations last Thursday, which triggered a cross default on other bonds.
On Monday, the state lender said that in order to continue with its operations, it will ask its funders to defer for one year all the debt repayment and interest that is due within the next six months. It will also ask them to waive current defaults and anticipated defaults for debt due within that six months period.
The bank said it has asked the commercial bank with the largest exposure to it to coordinate all the commercial banks it owes into a group. It has also asked the Association for Savings and Investments SA to coordinate bond notes holders.
Bloomberg reported on Friday that funders of the agricultural bank were willing to help the state-owned lender recover from the loan default if government gives a commitment to pitch in too.
National Treasury, meanwhile, said last Monday it was considering recapitalization and further guarantees for the bank.
“Assistance in the form of recapitalisation and further guarantees is under consideration and would have to be accompanied by balance sheet optimisation of the Land Bank to correct the structural liquidity risk embedded in the balance sheet,” said Treasury in response to Fin24’s questions on April 20.