South Africa’s Bayport Sees Debt Market Open as Rival Collapses
Oct. 1 (Bloomberg) — Bayport Financial Services, which provides unsecured loans in South Africa, sold a bond and said it expects debt markets will continue with support even after larger rival African Bank Investments Ltd. collapsed in August.
Like Abil, as the failed bank is known, Bayport doesn’t take deposits and typically relies on the debt market for funding. It’s sold more than 50 bonds since 2011 and while it took a break from the market after March, it issued a 130 million rand ($11.5 million) asset-backed note on Sept. 29.
“We refinanced 130 million rand of the 200 million rand short-term debt, which was slightly above the targeted amount of 120 million rand,” Stephen Williamson, Johannesburg-based chief executive officer of Bayport, said in an e-mailed response to questions yesterday. “We have 190 million rand of amortizing note repayments. The remaining amortizing maturities will be paid down. We have been reserving cash since April.”
Abil failed after bad debts rose, losses mounted and capital markets stopped providing funding. South African consumers are struggling to repay loans amid a slowing economy, rising inflation and increased unemployment. Abil’s failure forced Toyota South Africa (Pty) Ltd. and Bayerische Motoren Werke AG to cancel debt sales in South Africa last month.
Extra Caution
“There is a heightened sense of circumspection on note issuers, but we expect that the debt markets remain open, albeit at higher pricing,” Williamson said. “We have been well supported to date and I expect that we will continue to be. We have access to other funding mechanisms through our parent. I think important to note is that Bayport is not targeting asset growth at present.”
Bayport’s investor report for the 12 months through August shows its interest margin dropped to a low of 16 percent and a negative return on assets of 3.5 percent. While gross loans and advances grew 6.6 percent from a year earlier, the bad debts ratio increased to 37.4 percent. The company widened its provision coverage for bad debts to 28.5 percent from 22.3 percent in August 2013.
Real People Investments Holdings Pty Ltd., another South African provider of small loans not backed by assets, said last month it was in funding talks with development finance institutions after Abil’s failure wiped out demand for corporate bonds.
To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net John Viljoen
