South Africa’s Land Bank indicated late on Monday that it was experiencing liquidity problems and had defaulted on a loan.

Well, that is what it seemed to imply in an obtuse SENS announcement after the market closed which flagged a “potential event of default”.  

In a “holding statement” that the Land Bank subsequently sent to journalists on request, it got to the point, midway through, in plainer English. Thanks for the transparency.

“The Bank has experienced a liquidity shortfall that has led to its inability to meet immediate obligations to settle a repayment requirement under the terms of a revolving credit facility with one of its lenders. This non-payment constitutes a default which the Bank’s needs to remedy. The Bank is in consultation with the lender concerned to negotiate a waiver and an extension of the repayment date in relation to the said default,” it said.

The latest Moody’s downgrade was the trigger.

“Some of the Bank’s lenders withdrew their facilities with the Bank, whilst other investors reduced their rollover of maturing facilities in order to operate within their investment policies that have restrictions on the level of investments made to organisations with the Bank’s current credit rating,” it said. 

The bank is also looking for breathing space from other creditors.

“Land Bank has been in engagements with other funders with a view to addressing this challenge, especially in regard to the deferral of financial obligations that will be falling due in the short term,” it said.

The bank is a key lender to the agricultural sector and, if South Africa’s land reform programme ever picks up steam, it would be expected to play a role. According to its 2019 financial statement, the Land Bank had R44.5-billion in loans and advances on its books. Its group profit for the year was R181-million, down from R254-million in 2018. 

Yet it is clearly in financial trouble and is joining a long list of stressed SoEs whose fortunes have taken a dramatic turn for the worse in the face of the downgrades and the Covid-19 pandemic. BM