African Bank receives offer for suspended preference shares

African Bank Investments (Abil), the South African lender that collapsed in August, said it received an unsolicited offer from Deep Value Investments for its preference shares.

African Bank had 13.5-million preference shares that traded on Johannesburg’s stock exchange until all its securities were suspended on August 11. The South African Reserve Bank (Sarb), which stepped in with a rescue plan on August 10, said the holders of preference shares may lose their capital. It arranged for six lenders and the Public Investment Corporation to raise R10-billion to recapitalise Abil’s viable assets.

“This offer does not in any way relate to the resolution plan referred to in the press release related to African Bank, issued by Sarb on August 10,” the Johannesburg-based lender said in a statement on Thursday. “The board of Abil would like to confirm that the entity making the offer is in no way authorised by or instructed to act on behalf of Abil.”

The African Bank administrator is planning an initial public offering for part of Abil next year, potentially allowing investors to recoup some losses. Tom Winterboer, appointed as administrator by the central bank, didn’t immediately respond to a message left on his mobile phone.

Whoever Deep Value are, “it may be that they believe the preference shares will have a recovery that is more than what they are offering, or it could be they see the debt negotiations being complicated,” Jean Pierre Verster, an analyst at Johannesburg-based 36ONE Asset Management, said by phone on Thursday.

Bargaining power
“If they have some kind of other interest in Abil, such as equity, they want to hold the preference shares to make sure they have more bargaining power, and can sway a more favourable outcome,” Verster said.

Abil’s statement gave no details on Deep Value Investments.

Abil first issued preference shares in 2005 in a private placement aimed at enabling black investors to buy a stake in the bank to make up for economic exclusion during apartheid. Abil sold more preference shares, which it said offered the highest yield among South African lenders, in 2011 and 2012 to raise capital for the bank.

While preference shares typically don’t carry voting rights, they entitle the holder to a dividend ahead of owners of ordinary shares. Holders of preferred stock also rank higher than ordinary shareholders in receiving proceeds from any liquidation. – Bloomberg

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