Significant milestone as RDS sorts out R3bn indemnity facility
Move a significant milestone
RESIDUAL Debt Services (RDS), the “bad bank” of African Bank, yesterday said that it had fully funded the R3 billion indemnity facility to the South African Reserve Bank (Sarb), thus releasing the central bank and National Treasury of any further potential liability towards it.
RDS curator Tom Winterboer said the bank settled the facility last month.
“The full funding of the indemnity reserve is a significant milestone,” Winterboer said. “The full repayment of the transaction loan and the full funding of the indemnity reserve mean Sarb and the South African National Treasury are now fully released from their potential liability of R6.3bn.”
In 2014, the government and a consortium of other banks partially bailed out African Bank to the tune of R10bn after the bank was put under curatorship following the crash of its shares.
The facility was part of the restructuring of African Bank to protect it against potential claims on loans written before the curatorship.
It paved the way for RDS to commence payment to senior unsecured creditors on a sixmonthly basis from ongoing collections of its loan book.
In addition to the Sarb facility, a transaction loan of R3.3bn was made available by the Sarb to RDS as part of the restructuring transaction.
RDS fully repaid the transaction loan to the Sarb in September last year.
Winterboer said the fact that the indemnity reserve was fully funded meant the Sarb indemnity facility provided was now no longer required.
“After the repayment of the transaction loan, all cash collected on the RDS advances book in excess of on-going operational needs of RDS, was set aside and accumulated in an indemnity reserve, as agreed in the restructuring transaction.”
Last year, the Myburgh commission that was tasked with looking into what had led to the spectacular collapse of African Bank found that both the bank’s directors and those of its holding company, African Bank Investments Limited (Abil), had acted negligently and conducted the business of the bank recklessly.
On Tuesday, the Independent Regulatory Board for Auditors chief executive Bernard Agulhas said that the regulators’ investigation into the collapse of African Bank in 2014 and the possible misconduct of auditors of the bank was nearing its conclusion.