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Following years of negotiations, the debt restructuring will officially come into effect on 16 September 2024, bringing an end to the bank’s default status, which has been ongoing since April 2020.
This restructuring encompasses multiple financial instruments from all its lenders, ensuring equitable treatment for all, regardless of the type of debt held or governing laws.
In a statement, Land Bank confirmed that legal agreements had been signed and all conditions had been met to implement the solution. The debt repayment will be made in six-month intervals, with scheduled payments continuing until March 2028.
Central to this plan is a significant equity contribution from government, which will help ensure the bank’s long-term sustainability.
Land Bank CEO Themba Rikhotso detailed the challenging process of reducing the bank’s substantial debt.
“At the time of the default in April 2020, the bank’s debt was R40 billion. Since then, it has been able to reduce that debt to R16 billion, which is being restructured such that it can be paid in six-monthly instalments up to 31 March 2028,” Rikhotso said.
He said that the bank had used cash receipts from client repayments and settlements to clear over 60% of the debt since the default.
Rikhotso said that the process of resolving the debt issue has been long and arduous, with negotiations spanning more than four years.
“The negotiations began in May 2020 and have culminated in the debt restructuring solution that has now been signed by all the lenders. The effective date for the implementation of the solution is 16 September 2024. It took about four-and-a-half years to resolve the debt issue,” he said.
According to Rikhotso, the restructuring deal has profound implications for Land Bank’s future. It signals the end of its default status, allowing it to explore alternative funding sources and remove restrictions typically imposed on entities in financial distress.
“The curing of the bank’s default status means that it is now able to explore alternative funding sources without the restrictions generally associated with an entity in default,” Rikhotso explained.
He added that the agreement would enable the bank to access at least R3,7 billion in equity from government, specifically allocated to advance loans under the blended finance scheme. This initiative is designed to support the agriculture sector by providing much-needed financial assistance to farmers.
“This [influx of capital] means the bank will increase its lending activities to support the agriculture sector and generate income that will contribute to its financial sustainability,” Rikhotso said.
Wandile Sihlobo, chief economist at Agbiz, said Land Bank’s leadership had steered the institution back on course.
“Congratulations to Land Bank’s leadership and team for progressing in turning the organisation around. The bank is vital for our agricultural progress and sustainability. We should all support the work of [its] leadership to get the organisation on the right path to continue with its essential work of [farmer] development while also supporting existing commercial farmers,” he said.
