Abil: Banque CIC sees opportunity
AS AFRICAN Bank Investments (Abil) bondholders calculate losses after a rescue of the lender that includes a debt write-down, Banque CIC Suisse sees a buying opportunity.
AS AFRICAN Bank Investments (Abil) bondholders calculate losses after the Reserve Bank rescue of the lender that includes a debt writedown, Banque CIC Suisse sees a buying opportunity.
The Basel-based money manager, which holds Abil’s Swiss francde-nominated notes maturing in July next year and November 2016, believes 10% impairment ordered by the Reserve Bank was “reasonable” and will help to save the lender, Luca Carrozzo, a fund manager at Banque CIC Suisse, said this week. Abil has been split into a “good” bank and “bad” book, with the Pretoria-based central bank buying soured loans.
“We see this 10% cut as a price for the quick solution for senior debt holders,” Mr Carrozzo said.
“We expect that the African Bank story will have a happy end, with some volatile moments. I would buy into weakness.”
Abil collapsed after saying last week it needed at least R8.5bn to survive, causing the stock to drop 95% in three days and bond prices to fall by more than half. While Banque CIC sold some of its holdings of the Swiss franc notes as yields surged, it held on to a portion, expecting things to improve, Mr Carrozzo said.
“We as investors needed to see a good business plan or an intervention by the government,” he said. “Now that this has happened, I think they will redeem the bonds.”
Debt holders in Abil will not be paid when R1bn of bonds mature next month, said Tom Winterboer of PwC, who was appointed caretaker of the bank.
“The September bonds are suspended for now — we need a better handle on things first,” he said. “Interest is being suspended. The 10% haircut for senior bondholders is on the interest and the capital.”
Momentum Asset Management, which holds Abil debt, said the 10% impairment might be too much, given the bank’s ability to recover loan repayments.
“Our initial reaction to the 10% haircut was one of surprise,” Conrad Wood, head of fixed-income investments at Momentum, said on Tuesday. “We’d like some insight as to how they arrived at that.”
Debt investors should be first in line for collections from the “bad bank” after the Reserve Bank had recovered the R7bn it paid for the loans. Momentum would have “very, very limited” appetite for new Abil debt, said Mr Wood.