African Bank ‘Mess’ May Offer Value for Investors Sifting Ashes
Nov. 28 (Bloomberg) — Frank Cadiz, the investor offering 5 rand ($0.46) for each African Bank Investments Ltd. preference share, is searching for value in the failed lender’s equity to recoup money he lost when the bank imploded.
Abil, as it’s known, crumbled in August after it forecast record losses and funding dried up. Cape Town-based fund manager Cadiz’s offer represents a 36 percent discount on 7.80 rand, the price on Aug. 8 before Abil collapsed.
Cadiz, 46, started Deep Value Investments (Pty) Ltd. in September to buy some preference shares that will be paid out more quickly than ordinary shares if Abil’s viable banking assets are listed on the Johannesburg stock exchange in a successful initial public offering next year.
“It shows that even when there is a mess, there is still some value in the ashes,” Bruce Main, a fund manager at Ivy Asset Management, said by phone from Johannesburg yesterday.
Abil had 13.5 million preference shares trading on Johannesburg’s stock exchange before all securities were suspended on Aug. 11. The South African Reserve Bank, which stepped in with a rescue plan on Aug. 10, said the holders of preference shares may lose their capital. It arranged for six lenders and the Public Investment Corp. to raise 10 billion rand to recapitalize Abil’s viable assets.
“I see value in Abil’s insurance business,” Cadiz, who is co-chief executive officer of asset manager Cadiz Asset Management, said by phone yesterday. “If there’s more value than the rest of the market sees, then I will benefit. Some may want the liquidity, or not to wait the term.”
Personal Gamble
The Abil administrator is planning an IPO for part of the lender in the first half of next year, potentially allowing investors to recoup some losses. Tom Winterboer, appointed to the role by the central bank, didn’t immediately respond to a message left on his mobile phone.
“I was invested in a lot of Cadiz funds with exposure to Abil,” Cadiz said. “I’m doing this in my personal capacity. My company is not involved. Preference shareholders will be compensated ahead of ordinary shareholders” if the IPO proves successful, he said, adding that no one has yet sold their holdings to him.
Abil revealed the approach to preference shareholders in a statement yesterday, saying that Deep Value Investments “is in no way authorized by or instructed to act on behalf of” the lender. The unsolicited offer doesn’t relate to the resolution plan put forward by the the central bank, it said.
Bonds, Shares
Cadiz Asset Management, which oversees about 34 billion rand of investments, bought Abil’s bonds before it collapsed and was also a shareholder, according to data compiled by Bloomberg.
Abil first issued preference shares in 2005 in a private placement aimed at enabling black investors to buy a stake in the bank to make up for economic exclusion during apartheid. Abil sold more preference shares, which it said offered the highest yield among South African lenders, in 2011 and 2012 to raise capital for the bank.
While preference shares typically don’t carry voting rights, they entitle the holder to a dividend before owners of ordinary shares. Holders of preferred stock also rank higher than ordinary shareholders in receiving proceeds from any liquidation.
To contact the reporters on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net; Janice Kew in Johannesburg at jkew4@bloomberg.net To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net John Viljoen, John Bowker
