Futuregrowth Sees S. Africa Land Bank as Threat to State Lending

Cattle graze on the Ehlerskroon farm, outside Delmas in the Mpumalanga province, South Africa on Thursday, Sept. 13, 2018. A legal battle may be looming over plans by South Africas ruling party to change the constitution to make it easier to expropriate land without paying for it, with widely divergent views over the process that needs to be followed. Photographer: Bloomberg/Bloomberg
Cattle graze on the Ehlerskroon farm, outside Delmas in the Mpumalanga province, South Africa on Thursday, Sept. 13, 2018. A legal battle may be looming over plans by South Africas ruling party to change the constitution to make it easier to expropriate land without paying for it, with widely divergent views over the process that needs to be followed. Photographer: Bloomberg/Bloomberg

(Bloomberg) --

Futuregrowth Asset Management said the government’s plan to drop a partial guarantee in a proposed restructuring of its beleaguered Land and Agricultural Development Bank of South Africa is “alarming” and may discourage private companies from lending to state firms in future.

In addition creditors of the bank, which has missed payments on debt, have been told that irrespective of the maturity of the debt they hold they will need to accept 5-year amortizing notes.

“There is now an elevated risk that this latest action may impact the ability of other state owned enterprises to raise funding in the domestic capital markets,” Futuregrowth’s head of credit, Olga Constantatos, said in a note to clients on its website. “We believe that this latest action by the shareholder is of deep concern and we implore Land Bank, its advisers and National Treasury to reconsider their position and place the restructure of Land Bank on a more sustainable path.”