(4 minutes read)
· Ratings agency Moody’s has downgraded South Africa’s Land Bank into “junk” status. The public sector bank is now having B3
rating with a negative outlook
· The cash strapped bank has defaulted on some of its debt that was due towards the end of April.
· The Bank, Moody’s says, has taken longer than anticipated time in rectifying the default.
Ratings agency Moody’s has downgraded South Africa’s Land Bank into “junk” status. The public sector bank is now having a B3 rating with a negative outlook. Significantly, it is the first state owned enterprise to fall into the junk category to be adjudged by Moody. The Bank provides close to 30% of the loans in South Africa’s agricultural sector. The cash strapped bank has defaulted on some of its debt that was due towards the end of April. The Bank, Moody’s says, has taken longer than anticipated time in rectifying the default. This gives a major jolt to the financial sector of the country, which is already reeling under the pressure of the economic fallout of the pandemic. For quite some time, the financial health of the beleaguered government bank was not in pink. The banking sources point out that the actual economic losses to creditors will be low, as both Land Bank and the Government of South Africa -as the sole shareholder – are committed to concluding a viable restructuring and recapitalization plan.
Over R5.7 billion of the Bank’s debt is government-guaranteed. Also, the Bank has attempted to seek further assistance from the Treasury, though the latter faces its own challenges in grappling with the fallout from the pandemic. Experts are of the opinion that the Land
Bank’s liquidity problems stemmed out of its over dependence on open capital market to raise money. It tried to compete with banks which
did not have any social or developmental obligations.
