(Reuters) - Bailed-out South African lender African Bank has launched an offer to buy back up to US$500m worth of foreign currency-denominated bonds in a bid to cut its interest bill, it said on Friday.
African Bank, which was rescued and recapitalised by the central bank after its parent African Bank Investments Limited collapsed in 2014, said the tender offer would be open until July 13.
“The rationale of the tender offer is to reduce the bank’s interest expense and thus improve earnings,” the group’s head of treasury Gavin Jones said in a statement.
In April, the bank was split into a “good” business aimed at attracting new clients, and Residual Debt Services to rake in old debts.
African Bank said the offer was only for foreign liabilities, but added those represented a significant portion of its total debts.
Foreign debt “is typically relatively expensive, particularly given the current macroeconomic and foreign currency exchange rate environment,” it said.
South Africa’s rand has lost more than a third of its value since the central bank in August 2014 threw the lender a lifeline worth US$940m at the time, underwritten by other local banks as well as the state pension fund.
Swiss bondholders, who own SFr432m (US$444m) of the bank’s debt, will be first in line for the buyback, while US bondholders, holding US$549m, will be next, African Bank said.
Reporting by TJ Strydom
