Linklaters and Webber Wentzel advise on the restructuring of African Bank
On 10 August 2014, African Bank Limited of South Africa was placed under the local bank rescue process of curatorship and Mr Thomas Winterboer of PricewaterhouseCoopers South Africa was appointed as its Curator. African Bank mainly offers unsecured personal loans to individuals in the medium to lower income segments in South Africa and plays an important role as a regulated loan provider for many South Africans. Since curatorship, Linklaters and Webber Wentzel have been advising the Curator on the restructuring of African Bank. The curatorship of African Bank was South Africa’s only experience of a bank curatorship in recent history.
At the same time as African Bank was placed under curatorship, the then Governor of the South African Reserve Bank, Ms Gill Marcus, communicated a restructuring proposal to the market. In the months following the curatorship, significant time was spent to further develop this restructuring proposal and a detailed restructuring plan was published for comment in 2015. Offers to various classes of creditors were then launched in early February 2016. The principal terms of the restructuring are as follows:
- A new group will be established and the new holding company will receive a ZAR10 billion capitalisation from the South African Reserve Bank, the Government Employees Pension Fund in South Africa and a consortium of South African banks;
- A newco (“Good Bank”) will acquire part of the African Bank business (the “Good Bank business”); and
- African Bank has made offers to its creditors, including offers to its senior and subordinated bondholders, to exchange certain bonds they currently hold in African Bank for new bonds in Good Bank (or, for subordinated bondholders, shares in its holding company), cash payments and a residual claim in African Bank.
Today the Curator announced that the proposed restructuring of African Bank received the overwhelming support of its creditors. This is a significant milestone in the delivery of the African Bank restructuring. Subject to a number of conditions being fulfilled, the target effective date for the commencement of the Good Bank operations and settlement of the exchange offers is 4 April 2016.
Bringing their combined South African and international experience to bear, the alliance firms Linklaters and Webber Wentzel, together with Prinsloo, Tindle & Andropoulos Inc, have worked together with PwC throughout the period of the curatorship to help African Bank management, the Curator and other interested parties deliver what is a novel, very complex and highly bespoke resolution to the circumstances confronting African Bank.
Richard Levy, partner at Linklaters, says:
"It has been some years since a significant South African bank faced a crisis of this nature. This has led to an amendment of South African banking legislation, which marks the prospect of further banking resolution law reform in South Africa. While there is work still to be done, today is a significant milestone in a journey that has spanned more than 18 months, has raised numerous complex legal issues and will end with the relaunch of the Bank."
Johannes Gouws, a partner at Webber Wentzel, says:
“The restructuring of African Bank has been a long and complex process during which the complexities of restructuring a bank within the South African legal framework were highlighted. During the process we encountered many new legal issues for which we had to find creative solutions in order for the restructuring to succeed. Through the hard work of the Curator and his advisory team, as well as the management teams at African Bank and Good Bank, and with the unwavering support of the South African Reserve Bank and National Treasury, we have now been able to reach the very important milestone of overwhelming creditor support and we look forward to launching Good Bank on 4 April 2016.”
The Linklaters’ team was led by Richard Levy, Richard Bussell and Arjun Muddu. The Webber Wentzel team was led by Johannes Gouws, Peter Bradshaw and Lara Kahn. The Curator was supported in this journey by David Gard, Peter Spratt, Craig du Plessis and Anton Esterhuizen of PWC UK.
For further information please contact Rupert Winlaw, Linklaters, on (+44 20) 7456 3219 or Nelisiwe Masina, Webber Wentzel, on (+27( 115305839.