Abil will hold IPO of viable assets

AFRICAN Bank Investments Limited (Abil), the South African lender that failed in August, is expected to hold an initial public offering (IPO) of its remaining viable assets next year, according to the Treasury.

“The listing of the good bank will now take place early next year,” Roy Havemann, the Treasury’s chief director for financial stability, said yesterday. The central bank’s injection might be “much smaller” than the initial estimate of R7 billion and “at this stage zero costs to taxpayers are anticipated”, he said.

Abil collapsed in August amid record losses and a lack of funding. The Reserve Bank stepped in with a rescue plan which involved separating the bad loans from the performing loans and reviving those viable assets through an IPO.

If the reorganisation is approved and law changes that increase the powers of administrators of failed banks are passed, African Bank will make a formal offer to its creditors in May.

“Things are on track, except for legal impediments on transferring liabilities,” Havemann said, referring to amendments to the Banks Act that are opposed by holders of subordinated debt. The bank’s curator would invite comment on the proposal before presenting a completed offer, he said.

When African Bank failed, senior debt holders were told to expect a 10 cent loss on every rand invested, while other creditors were warned they may lose everything. Before August, the bank was South Africa’s biggest provider of loans not backed by assets.

The Treasury now says the bank may change its business model to offer secured lending and target higher-quality credit risks. John Myburgh was appointed by the central bank last year to investigate any evidence of fraud and the Treasury was awaiting his report, Havemann said. “There will be accountability if there are concerns with the management process” of Abil before it collapsed, he said. – Bloomberg