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The Land Bank has failed to avoid financial ruin after the debt default due Thursday. Default has now caused cross-default of certain other bonds, a clause that puts the borrower in default if he fails to meet his other debt obligations.
“On April 23, 2020, the Land Bank issued a SENS announcement advising note holders … that the Land Bank anticipated possible additional defaults on debts due today, and that if such defaults occurred, this would result in a Default event under the promissory notes. Those subsequent defaults occurred, “the Land Bank said in a statement published in the Stock Exchange News Service (SENS).
While the Bank had previously said that it “may have” defaulted on its national bond promissory notes issued in 2010 and 2017 totaling around R50 billion, this had not yet caused the cross default. But Thursday’s events have conclusively confirmed the 2010 bond default event and the 2017 program crossover default, he said.
The state bank informed its bondholders on Thursday that it was negotiating with creditors on the debt that was maturing on the day because its current liquidity challenges made it impossible to pay them. The bank had approximately R738 million of debt scheduled to mature before the end of April 2020 that needed to be deferred.
In early April, he requested assistance from the National Treasury. On Monday, the public portfolio controller said it was considering helping Land Bank with some form of recapitalization and more guarantees, and also asked its creditors not to claim debt that Land Bank is at risk of default at this time.
However, the subsequent announcement on Friday that the default has occurred means that it was unable to convince its lenders to postpone payments and waive the default event. The bank’s most recent financial statements for fiscal year 2019 show that it had R30.2 million of bonds issued by Land Bank at the end of March last year.
Analysts have previously warned that failure to avoid Land Bank default could have adverse implications on the bank’s ability to lend to the most vulnerable farmers, threatening food security in areas that commercial farmers cannot easily reach.
