Lender eases its stance on bank
Futuregrowth lifts suspension
FUTUREGROWTH has extended an olive branch to embattled state-owned enterprises (SOEs), with the Land Bank yesterday announcing that the asset manager had agreed to lift the suspension of lending facilities for the bank following an extensive review of the governance and investor protection mechanisms of the institution.
The slight bending on the bank by Futuregrowth has given hope that the remaining SOEs could soon be in line for future lending following unprecedented pressure on the lender.
Land Bank chief financial officer Bennie van Rooy yesterday said the relaxation of the rules was a correct decision that would help the bank to fulfil its mandate.
“The biggest concern about the initial decision by Futuregrowth was putting the Land Bank in jeopardy on its ability to raise funding. The reputational risk and governance within the bank was in doubt. Now that it has been lifted, we can focus on raising the funding knowing very well that our reputation is not at stake anymore,” Van Rooy said.
Futuregrowth, Africa’s biggest private fixed income money manager with about R170 billion of assets, last month pulled the plug on SOEs, suspending new loans and roll overs of existing debts. Further clarity Chief investment officer Andrew Canter said at the time that the decision would stand until the asset manager had obtained further clarity and comfort on the governance and oversight on the Land Bank, Eskom, Transnet, the South African National Roads Agency, the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa.
The decision was followed by a sharp rebuke from the SOEs, leading to the lender’s parent company Old Mutual distancing itself from it.
Eskom boss Brian Molefe took the reprimand even further, describing the lender’s concerns as frivolous and outlandish. Molefe said if Futuregrowth had genuine concerns, it should have raised them with the affected institutions.
“Our financial performance has improved with a healthy liquidity position. Generation performance has been stabilised with continued improvement expected,” said Molefe.
The IDC said while it respected Futuregrowth’s investment decision as a lender and investor that had responsibility to evaluate and manage risk in their business activities, it was disappointed it was not consulted on the matter.
Yesterday, Futuregrowth said the lifting of the Land Bank suspension would be subject to agreed amendments and provisions in lending agreements as well as continual monitoring of the bank’s governance and finances.
“The extensive review included interaction with Land Bank’s executive management team and its board, as well as an assessment of Land Bank’s policies, and practical evidence of the appropriate application of these policies. Due diligence showed that currently there is an appropriately constituted board with a balance of skills and experience; a positive and constructive relationship between board and executive authority; and evidenced application of policies and process,” Futuregrowth said.