Johannesburg - Investors are betting that African Bank’s odds of survival have improved following a Reserve Bank rescue.
Credit: INDEPENDENT MEDIA
Since April 8, yields on the Johannesburg-based company’s $280 million (R4 billion) of bonds due in October 2020 had dropped by 12 basis points to 10.42 percent in London yesterday.
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The securities started trading last week after South Africa’s central bank helped revive what was once the country’s largest provider of loans not backed by assets.
The notes were “definitely feeling better bid today”, Petrie van Vuuren, a London-based credit trader for a unit of FirstRand, said. He added that a rally in emerging markets on Wednesday had helped to improve sentiment toward riskier assets.
“Trade going through remains pretty small though – trade sizes vary from $500 000 to $1m in nominal value. Still, that’s a notable improvement in liquidity compared to a week ago.”
African Bank collapsed in August 2014 with senior-debt investors owed more than R40bn. As part of a revival, which involved a fresh banking licence and setting up a new lender, the old bank’s investors were swopped into new debt instruments on April 4, with bondholders able to recoup their investments after taking an initial 10 percent haircut.
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