The extension also applies to the ratings agency’s review of the Caa2.za national-scale long-term issuer rating of African Bank – which forms part of the banking unit of [DATA ABL:African Bank Investments Limited] (ABIL).
According to Moody’s, the extension of the review reflects the fact that the South African unsecured lender’s restructuring plan is still in the process of being executed.
“Moody’s decision to extend the rating review process is driven by the fact that the South African Reserve Bank’s (SARB) restructuring plan still remains in progress,” it said.
“In addition, the bank’s holding company announced that it will delay the publication of its final results for the financial year ending September 2014, because of accounting and audit complexities following the deconsolidation of its retail furniture subsidiary.”
(READ MORE: S.African bank ABIL delays results announcement)
The agency further stated that African Bank’s current ratings capture the implied losses of 10 per cent that the SARB’s restructuring plan imposes on both senior debt and wholesale deposits.
“The review for downgrade continues to capture the implementation risks of SARB’s restructuring plan for the bank, in conjunction with the risk of higher-than-anticipated losses that depositors and bondholders could incur,” Moody’s said.
“As part of the review, Moody’s will monitor African Bank’s latest financial fundamentals and potential announcements regarding the progress of the restructuring plan, which will allow the rating agency to re-assess depositors’ and bondholders’ expected losses.”
It added that the planned timeline to complete the restructuring is 31 March 2015 and that before or by this time, it expects to gain enough clarity on the implementation of the restructuring plan in order to conclude the rating review process.
(READ MORE: Curatorship the start to saving African Bank)
“African Bank’s ratings could be further downgraded if Moody’s believes that losses imposed on senior debt holders and wholesale depositors are likely to materially exceed the 10 per cent level communicated by SARB,” Moody’s stated.
“In addition, the ratings could be downgraded if there are any lapses or delays in the implementation of the bank’s restructuring plan. The rating review for downgrade indicates that there is limited upside potential for African Bank Limited’s ratings over the near-term.”