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'Furniture debtors must still pay up'

Category Banks

Debtors owing money to six furniture stores - Wetherlys, Geen & Richards, Beares, Furniture City, Dial-a-Bed and Ellerines - must still pay their loans despite the stores' holding company African Bank Investment Limited (Abil) being under curatorship.

But banking analysts warn curator Tom Winterboer's 'toughest task' was to convince debtors to honour their loans.

SA Reserve Bank governor Gill Marcus announced on Sunday that Abil was placed under curatorship. Roshnee Pillay, spokeswoman for Ellerine Furnishers, said repayment of loans taken to buy furniture at any of the stores remained legally binding. Ellerine Furnishers has applied for a business rescue.

Analyst Graeme Körner, from Körner Perspective, said 'the biggest task for the curator was to assert a culture of repayment among customers'.

'This might be difficult in the current climate in which people just came from a five month or one month strike and their disposable income levels are low,' he said.

The reserve bank warned there was 'no payment holiday' for anyone owing on a loan to African Bank or its subsidiaries.

Marcus said Ellerines had been a significant drain on Abil, requiring funding support of a minimum of R70 million a month.

In placing Abil under curatorship, the Reserve Bank has divided it into a 'good book' and 'bad book'.

The good book will be given R10 billion for recapitalisation. The recapitalisation bill would be funded by, among others, Capitec, FirstRand, Investec Bank, Nedbank, and the Public Investment Corporation (PIC).

The 'bad book' of underperforming loans, will no longer form part of the bank and is valued at R17bn, of which the Reserve Bank will pay R7bn.

Marcus said every effort would be made to ensure that collections against the bad book continued, to avoid any burden to the taxpayer.

Saambou was the last bank to be placed under curatorship in 2002.

Körner said Abil was more relevant in the financial system than Saambou was, because it touched a lot more lives

'Politically the incentive is big to bail the bank out.'

Yesterday, the banks underwriting the capital for Abil, said their exposure was not significant and the country's banking system remained healthy and robust.

Matshepo More, PIC acting chief executive, said the intervention would help salvage Abil and restore its place in the banking sector.

Meanwhile, it has been reported that the Debt Counselling Industry (DCI) yesterday called for a probe of the National Credit Regulator (NCR) for not properly investigating African Bank.

'Over the past few years, debt counsellors have lodged thousands of complaints, many relating to reckless lending... against the country's major credit providers, including African Bank,' DCI founder Deborah Solomon said.

'These complaints have repeatedly been sent to the regulator who has chosen to ignore them and the plight of desperate consumers.'

DCI called on the government to launch a high level investigation into the NCR to find out why it was not doing its job properly.

The NCR was not immediately available for comment.

Author: IOL

Submitted 12 Aug 14 / Views 2424