African Bank curatorship update

Dear investor,

There have been a number of new developments towards the resolution of African Bank, which has been in curatorship since August last year. STANLIB continues to play a leading role in working with the South African Reserve Bank and African Bank's curator to help get our clients closer to a resolution.

Although there have been some delays in the process of creating the Good Bank out of the restructuring of African Bank, the good news is the process is still on track, as originally planned by the South African Reserve Bank.

The Good Bank was due to launch on 1 February 2016, but the curator announced on Friday 23 October 2015 that this had been delayed, possibly to April 2016, following the failed attempt to acquire insurance company, Standard & General Insurance Company (Stangen). Stangen is owned by African Bank Investments Limited, the previous holding company of African Bank.

The curator intended to buy Stangen to be part of the new Good Bank and supply credit life insurance to customers. This plan fell through after some shareholders brought an urgent interdict to prevent the sale from happening, as they considered the price of R1.4 billion to be too low.

Although the transaction was unsuccessful, it will not impact the creation of the Good Bank. Instead, the curator will set up an insurance cell captive structure through an alternative provider.

When African Bank was placed under curatorship on 10 August 2014 the South African Reserve Bank decided to create a new Good Bank out of the old African Bank. However, as this was the first time this had been done in South Africa, a number of steps had to first be taken before a Good Bank could be created.

The following measures have been taken towards finalising the creation of the Good Bank:

  • The Banks Act of 1990 had to be amended to make the African Bank transition into the new Good Bank legally possible. The Banks Amendment Bill of 2015 was signed by the President into law on 25 June 2015
  • The South African Reserve Bank authorised the creation of the Good Bank under the Good Bank Restructuring Proposal on 27 August 2015.
  • The Financial Services Board has granted the Good Bank a licence to be a Financial Services Provider
  • The Information Memorandum was released on 9 September 2015 for consideration and comments. It contains the details of how the transfer of African Bank business into the new Good Bank will take place
  • The curator provided more clarity on how he plans to deal with senior and junior (subordinated debt) fixed interest investments issued by African Bank, which gives us some comfort in the value that is assigned to your investments held in side pockets.

The curator has made good progress in appointing key executives with extensive experience, including CEO for the Good Bank, Brian Riley, Louis von Zeuner as chairman and Gustav Raubenheimer as Chief Financial Officer Designate of the Good Bank. All of these are strong appointments.

There are a number of steps that need to still happen before the Good Bank can be created. The timing for these steps still needs to be confirmed, as they have changed since the curator decided to proceed without Stangen. The steps are:

  • Issuance of Offer Information Memorandum
  • Submission of Curator Report to the Minister of Finance
  • Creditor Vote process
  • Update report by Curator to Minister of Finance
  • Consent from Minister of Finance
  • Once the Minister of Finance has signed the Offer Document, it will be made available to all affected creditors, who need to give their consent
  • Once sufficient consent is received, the Good Bank Restructuring Proposal can be implemented

While the process is ongoing, STANLIB will continue to hold the senior and junior fixed interest instruments in retention funds as these instruments still cannot be traded. At the moment, we have no clarity on when investments held in retention funds will be available to you. As soon as we know more about this, we will let you know.

STANLIB will continue to play a leading role in working with the South African Reserve Bank and African Bank's curator to reach a resolution on behalf of our customers. 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,

Bongani Mageba

Managing Director: STANLIB Retail