In a shocking move, South Africa's largest fixed income manager has halted all lending to state-owened entities on governance concerns.
- *FUTUREGROWTH SAYS IT CAN'T PLACE CLIENT MONEY AT RISK
As Bloomberg details,
Africa’s biggest private fixed-income money manager will stop lending money to six of South Africa’s largest state companies because it’s concerned about how they are being run, government infighting and threats to the independence of the finance ministry.
Futuregrowth Asset Management, which has about 170 billion rand ($11.7 billion) in assets, shelved plans to lend more than 1.8 billion rand to three state companies on Tuesday, Chief Investment Officer Andrew Canter said by phone from Cape Town on Wednesday, without giving more detail. The fund manager will only resume offering loans and rolling over existing debt once it has determined that what it sees as proper oversight and governance at the companies have been restored.
The companies are power utility Eskom Holdings SOC Ltd., rail and ports operator Transnet SOC Ltd., South African National Roads Agency SOC Ltd., the Land Bank of South Africa, the Industrial Development Corp. of South Africa and the Development Bank of Southern Africa. The decision won’t immediately affect lending to the government and other state bodies such as water boards and municipalities.
“We’ve observed recent reports that strongly hint of conflict between branches of South Africa’s government, the possible machinations of patronage networks and a seeming challenge to the National Treasury’s independence,” Canter said.
“Any material risk to the state-owned entities’ governance, budgeting and approval processes for spending or lending must impact on our forward-looking credit assessments. It is difficult to make reasoned and defensible decisions to continue providing state-owned companies with additional funding using clients’ money.”
Bonds of the major SOEs are tumbling as are South African bank stocks. And the Rand is heading down towards post-Brexit lows…
Fallout continues…
- ZAR falls 0.9% to 14.6327 per dollar by 2:45pm in Johannesburg, heading for weakest closing level since July 7.
- Yield on benchmark rand-denominated government bonds rise 2bps to 9.01 percent
- Yield on Eskom’s $1.25b of Eurobonds due Feb. 2025 rise 28bps to 7.15%, set for highest since July 7
via http://ift.tt/2c4nCjr Tyler Durden