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Riku Tanaka
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April 24 19:19

Land Bank default brings focus to South African state-owned firms' finances

Bank warned financial specialists that it was in danger of defaulting on its 20 billion rand Domestic Medium Term Note (DMTN).
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Land Bank warned financial specialists that it was in danger of defaulting on its 20 billion rand Domestic Medium Term Note (DMTN) Program dated 18 October 2010 and its 30 Billion rand DMTN Program dated 13 March 2017.

"Those defaults have subsequently occurred," the lender said in a statement dated April 23, but issued on Friday (Apr 24).
Fitch, a financial rating organization, had just said on Thursday (Apr 23) that the loan specialist, Land Bank, had defaulted on obligations and that dangers presented by state-owned business had played a role in its choice to bring down South Africa's FICO score this month to BB, from BB+.
Land Bank is just one of several companies owned by the government, confronting financial troubles and compounding the pressure on President Cyril Ramaphosa's destitute administration as it struggles to resuscitate the recession hit-economy.
The bank itself, which primarily finances farmers, had said on Monday (Apr 20) that it was facing a downturn in liquid assets and was discussing options with stakeholders regarding its financial commitments.
Fitch had also said that Land Bank's failure to repay its debt may impact the ratings of other firms owned by the state such as the transport and logistics group Transnet and utility co Eskom. Eskom is now infamous for being buried beneath money problems for years.
"Both Transnet and Eskom have ongoing requirements to access capital markets," Fitch said in its statement on Thursday (Apr 23). "If Land Bank’s default influences investor perceptions of government support it could affect this access, particularly for Eskom."
Fitch said it expected government support for development banks to proceed.
"We expect the government to continue to support the development banks, as they are an important part of the government's strategy to maintain and expand investment in the context of rising constraints on direct fiscal spending," Fitch said.
Another large company that is also struggling to stay afloat is South African Airways after it procured a type of bankruptcy insurance in December of 2019.