SARB Recoups 3.3 Billion Rand Loan Made to Failed Abil Unit

(Bloomberg) -- Residual Debt Services Ltd., which took on the non-performing loans of African Bank Investments Ltd.’s lending unit after it failed, said it paid 3.3 billion rand ($231 million) to the South African Reserve Bank to settle credit that was first extended in 2014.

Between April and September of this year Residual Debt Services collected as much as 400 million rand each month and, together with retained cash, was able to repay the central bank, the Johannesburg-based company said in a statement on Thursday. With all of the money owing to the central bank now repaid, “it’s an important milestone for us and we achieved it earlier than we’d hoped,” Tom Winterboer, curator of Residual Debt Services said by phone.

African Bank Investments Ltd.’s lending unit collapsed in August 2014. The central bank stepped in to rescue the viable assets and in April of this year the business was split into a new lender, African Bank Ltd., and Residual Debt Services, which houses the so-called bad book. When the bank failed, shareholders lost everything and bondholders, with more than 40 billion rand invested, were told they would have to take a haircut. In May, a central-bank probe into the collapse found that directors allowed ex-Chief Executive Officer Leon Kirkinis to dominate the board.

While collecting on the bad loans has become tougher amid South Africa’s deteriorating economic conditions, the money recouped will now go into an indemnity fund which will house as much as 3 billion rand for the next eight years in case of claims against the new African Bank, Winterboer said. If there are no significant claims, the money will be paid out to holders of senior stub debt instruments and anything leftover will go to subordinated stub debt investors, he said.

“It’s all come together, although there’s still a lot of work to do,” said Winterboer, who was appointed by the central bank to look after the lender’s assets just four days after it collapsed. With African Bank Ltd. back to being a fully-fledged lender with the financial wherewithal to have started buying back some of its bonds, and Residual Debt Services having repaid its loan, “it’s rewarding from a personal point of view,” he said.

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net. To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Vernon Wessels, Michael Shanahan