South Africa’s National Treasury and the state-owned Land and Agricultural Development Bank are being accused of dragging their heels in negotiating a rescue package for the stricken lender, leaving creditors in the dark as debt repayments loom.

Asset managers and other lenders are yet to receive a response to their queries about financial covenants and the mechanism of a new bond program that will be 60% backed by the government, according to the country’s biggest specialist fixed-income money manager. The state-owned bank missed a repayment in April that triggered a cross-default event under its R50-billion bond program.

“The note holders and the banks are very much in agreement as to what is needed -- we need proper lending conditions because it’s not a 100% guarantee,” Olga Constantatos, head of credit at Futuregrowth Asset Management, said in an interview. “There has not been enough engagement on the issues.”

The partial guarantee means that about R16.6-billion of the Land Bank’s R41.5-billion of debt is not guaranteed, she said in a separate note to clients. Note holders submitted their queries on the covenants and guarantee in October.

The 108-year-old bank, which owns almost 30% of loans to South African farmers, said last month that it can’t take on new clients or meet half the needs of existing customers until it gets another government bailout to keep operating. While it received 3 billion rand from the Treasury earlier this year, which allowed the Land Bank to resume interest payments and cover arrears on its debt, the lender needs an additional R7-billion.

The Treasury said it will address the bail out when it tables the annual budget in February. The Treasury referred queries to the Land Bank, which didn’t immediately respond to requests for comment. The lender on Nov. 23 announced that the implementation of the rescue proposals were postponed until March from the end of November.

‘STAND STILL’
Constantatos, whose firm oversees about R194-billion in assets, including Land Bank debt, said lenders need covenants around non-performing loans at the Land Bank, on its cost-to-income ratio and its capital adequacy ratio if they’re to support the bond program. Groups representing asset managers and banks are in agreement, and, so far, attempts to meet with the Treasury have been unsuccessful, she said.

The Land Bank has R245-million of floating-rate notes due on March 23, R306-million rand payable on Sept. 20 and another R1.38-billion rand on Oct. 12, according to data compiled by Bloomberg.

While creditors have been told they may receive a response to their queries next week, “lenders are effectively being asked to stand still,” Constantatos said. “Things are maturing now, there are a rolling series of defaults.”