African Bank curatorship update

Dear STANLIB client,

African Bank’s curator has recently made a number of new, reassuring proposals regarding the resolution of the bank, which has been in curatorship since August last year.

Last week the curator announced that, should everything go according to plan, the Good Bank is scheduled to launch on 4 April 2016. When African Bank was placed under curatorship on 10 August 2014 the South African Reserve Bank (SARB) decided to create a new Good Bank made up of selected assets and liabilities of the original African Bank.

When the curatorship was announced, the SARB wrote down the value of African Bank’s bonds – by 10% for senior fixed interest investments (bonds) and to zero for junior (subordinated debt) bonds. This write down in value caused a once-off loss to any fund which had invested in junior or senior corporate bonds issued by ABIL. Subsequently, in a positive move, the curator revised the junior bond holder offer to propose that investors get a portion of the value back.

Last week, there was further good news for investors in African Bank bonds. The curator has proposed that senior and junior debt holders be paid some cash once the Good Bank is established. The curator will then also issue “good bank” bonds. Most listed companies issue bonds as a way to fund their operations. These “good bank” bonds will be exchanged for the old bonds in the bank and held in your retention funds.

The cash that will be paid out on the establishment of the Good Bank, as well as interest that has accrued on your investments, will be released into your retention funds.

The “good bank” bonds will be listed on the JSE and are expected to begin trading from 4 April 2016. We must caution that as these financial instruments will be traded in an open market, they will be valued in accordance to the market value of the day. This means the market will determine the value of the “good bank” bonds.

We assure you that we remain committed to your investment with STANLIB. Should you have any further questions or require additional information, please contact your financial adviser or refer to the STANLIB website, www.stanlib.com.

Regards,

Herman van VelzeHenk Viljoen
Head of STANLIB InvestmentsHead of Fixed Interest Franchise