Published On: Wed, Sep 3rd, 2014

African Bank woes ‘won’t do Nedbank unit much harm’

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nedbank_125AFRICAN Bank’s collapse has had a less than 1% effect on Nedbank Private Wealth’s income portfolio, according to Dave Macready, managing executive of the division.

The bank ring-fenced its income portfolio’s 6.95% of senior debt in African Bank on August 7 in a “side pocket” that clients could not access until the market normalised and this debt could be sold or matured, said Mr Macready yesterday. “This was a proactive step taken in the interests of all clients and to ensure that no client is treated unfairly due to an illiquid asset with an uncertain value at the time.”

African Bank, which is a subsidiary of African Bank Investments Limited (Abil), was placed under curatorship on August 10 after it announced it was expecting a full-year loss of “at least” R6.4bn and needed to raise R8.5bn to keep the bank going. Consequently, its share price plummeted 90% before the Reserve Bank placed it under curatorship.

The Reserve Bank’s remedy included a 10% haircut on the investments of bondholders and large corporate depositors in the failed bank. Shareholders, in effect, lost their entire investments.

Many fund managers — including Coronation, Stanlib and Allan Gray — were caught unawares with large exposures.

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