What next for the embattled Land Bank?

The Land Bank, a state-owned enterprise, that extends a large proportion of credit to commercial and emerging farmers, announced on Friday morning that it will be advising note holders that it has formally defaulted on its obligations.The Land Bank has assets of approximately R52bn, the large proportion of which, R44.4bn, are loans to commercial and emerging farmers and companies active in the agricultural chain.

So the notes vary in the type of interest to be paid ; the absolute interest rate; and the term for which they are issued. The basic structure entails an investor buying the notes upfront and receiving interest over the term of the note, before repaying the capital at the end. The cross-default clauses in the DMTN programmes mean that if the bank fails to meet interest or capital repayments on any of the notes as those obligations come due, the holders of all the notes are entitled to demand repayment. This means that, if the note holders so choose, they can demand immediate repayment of R13.4bn. And that is money the Land Bank does not have.Whether the note holders decide to call the debt — demand repayment — is unclear at the moment.

But the question facing the government is whether it wants one of the biggest sources of credit for the agricultural industry to risk being put into liquidation by note holders that have not been repaid.

Would like Mboweni to tell us exactly why the land bank finds itself in this position

How much has been siphoned off in dodgy land deals and corruption!

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