Default may trigger a call by creditors for as much as R5.7bn from the government
The state-owned Land Bank has defaulted on obligations linked to a revolving credit facility, which has triggered a default clause that may put the government on the hook for as much as R5.7bn.
The bank recently sought and received a large increase in guarantees, announcing in February that the National Treasury had provided government guarantees amounting to R5.7bn. This means the government would be required to honour debts up to this amount of funding to the bank’s sources. The Land Bank says it is in discussions with the lender and is seeking a waiver in the event of default presumably to prevent other creditors asking for their money back. Credit ratings agency Moody’s Investors Service downgraded the Land Bank in January citing “elevated credit risks, declining capital and low earnings generating capacity” as well as policy uncertainty relating to the expropriation without compensation policy the governing party was embarking on.
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