A State-owned South African bank that finances farmers is in talks with funders to raise as much as $1-billion as it recovers from a default five years ago.

The Land & Agricultural Development Bank of South Africa has an indicative term sheet for that amount from a development financing institution, CEO Themba Rikhotso said. It will engage with the National Treasury before the end of the month to get its support for the plans, he said.

“There is a lot of interest,” Rikhotso said in an interview at the Nampo Harvest Day expo near Bothaville in the central Free State province on Wednesday. He didn’t want to identify the funder whose term sheet the Land Bank has received.

The Land Bank is among several state companies damaged by years of declining capital investment and mismanagement, hurting their finances and leaving them reliant on government handouts to survive. The lender resumed debt repayments in September after it defaulted in April 2020.

The bank’s outstanding debt has fallen to R9.4-billion ($515-million), from R45-billion in 2020, Rikhotso said. Its latest biannual debt repayment was at the end of March. As part of finalizing its borrowing strategy, the Land Bank this month hired Priscilla Jezi as head of funding, Rikhotso said.

“One of the things we consider as part of the funding program is some mechanism to either refinance the current debt or to swap it out,” he said. “Whatever we’re considering now is within what is allowed with the current debt, including paying it off.”

A drought in South Africa’s central provinces last year affected some clients’ ability to pay their debt to Land Bank, Rikhotso said. About 35 producers, the bulk of whom are livestock farmers, are under distress and will receive financial help.

“The livestock is still there, but they could not reach the desired market weight,” so they had to postpone taking it to the market, Rikhotso said. “Their ability to pay is affected, and we’re putting in place debt-relief packages for those.”