Credit information Liabilities and Forecasts IN RESPECT OF THE - PowerPoint PPT Presentation

Credit information – Liabilities and Forecasts IN RESPECT OF THE LIABILITY SOLUTION OF THE LAND AND AGRICULTURAL DEVELOPMENT BANK OF SOUTH AFRICA 22 September 2020 Disclaimer: The March YE 2020 and June Q1 2020 results in this presentation are preliminary and unaudited. Any forward looking statement included in this presentation has not been reviewed or reported on by Land Bank’s external auditors. Preliminary unaudited credit information 1

Executive Summary The purpose of this Financial Information document is to provide the market with additional information on the key credit ▪ drivers of the Land Bank Please refer to the links below for: ▪ ‒ The latest Integrated Group Report for the year ending 31 March 2019; and Purpose ‒ Unaudited half year results as at 30 September 2019 https://landbank.co.za/Shared%20Documents/Annual-Report-2018-2019.pdf https://landbank.co.za/Investor%20Presentations/Land%20bank%20Fixed%20Income%20Investor%20Roadshow%20September%20 2019.pdf The information reflects the Land Bank’s detailed liabilities as at 31 March 2020; ▪ The Land Bank announced an Event of Default on 24 April 2020 and the majority of liabilities as at 31 March 2020 are now in ▪ default (mostly through the cross-default provisions); Liability Solution To cure the Event of Default, the Land Bank seeks lenders’ assistance especially within the “involuntary process” as detailed ▪ in the summary of the Liability Solution included herein; The indicative start date for the implementation of the Liability Solution is mid November 2020 and will include a 5% capital ▪ reduction which will be paid to all lenders with the Liability Solution Preliminary unaudited credit information 2

Outline 1. Overview 2. Debt profile as at 31 March 2020 3. Distributions and Collections / Cash flow forecast 4. Summary of the Liability Solution Preliminary unaudited credit information 3

Debt profile as at 31 Mar 2020 Break down of total funding by source (including capital and accrued interest) Source R ‘m South African capital market note issuances 16 248 Step rate notes 1 014 Promissory notes 11 261 Further information Other commercial funding 5 919 included on: Term loans – amortising 3 636 Slide 5 Adjustment (7) Term loans – bullet 1 002 Development and multilateral funding 1 925 Slide 6 Drought relief amortising loan 287 41 284 Summarised debt maturity profile 18,000 16,000 The Majority of the 12 month maturities • 14,000 consist of: 12,000 Promissory notes ‒ 10,000 ZAR ‘m ‒ Bills 8,000 6,000 ‒ Deposits 4,000 ‒ Bank overdraft facilities 2,000 0 <12 months 1-3 years 3-5 years >5 years Note: The amortising debt in the profile above is included as a bullet on maturity. This skews the >5 years graph as most of the profile will roll off within the initial 5 year period. Preliminary unaudited credit information 4

Debt profile as at 31 Mar 2020 South African capital market note issuances R’m Floating rate notes Maturity date 12 823 - LBK15 12 October 2021 1 404 - LBK18 22 March 2022 734 - LBK22 04 September 2020 572 - LBK23 05 September 2022 615 - LBK26 23 March 2021 245 - LBK27 23 March 2023 2 024 - LBK30 20 September 2021 307 - LBK31 20 September 2023 922 - LBK32 08 November 2023 506 - LBK33 07 December 2025 754 - LBK35 26 March 2024 1 001 - LBK36 25 June 2020 200 - LBK37 25 June 2024 801 - LBK38 16 February 2023 518 - LBK39U* 23 March 2025 982 - LBK40U* 23 March 2023 421 *100% government guaranteed unlisted bonds - LBK41U 16 March 2021 818 Fixed rate notes 3 425 08 June 2022 - LBK20 820 - LBK24 10 October 2024 844 15 May 2028 - LBK28 962 - LBK29 07 June 2023 798 Step rate notes 24 May 2022 1 014 11 261 Promissory notes Various 5 919 Other commercial funding Various 3 632 Term loans – amortising: 10 year syndicated loan (MIGA supported) 20 March 2027 1 002 Term loans - bullet term: 3 year syndicated loans 12 March 2022 Preliminary unaudited credit information 5

Debt profile as at 31 Mar 2020 Development and multilateral funding - R1bn loan facility from the African Development Bank - purpose is to on-lend to commercial and development clients who meet qualifying usage criteria. To date R743m has been utilised with a further R257m available for qualifying projects. - US$93m (limited to R1.3bn) funding line with the World Bank - earmarked to give financial aid to participating financial intermediaries and direct beneficiaries. As at 31 March 2020 R390m had been drawn (capital only, R395m below included accrued interest). - R899m funding line with KfW Development Bank. This facility is earmarked to finance small-sized and medium-sized agricultural enterprises. The facility is fully drawn. - EUR50m funding line from the European Investment Bank. The facility is project based and will be drawn as and when qualifying projects are financed. As of 31 March 2020, there had been no draw down under this facility. The facility aims to promote "Climate Adaption" within the agricultural sector. Disaster relief The Land Bank has a R400m facility with the Industrial Development Corporation for the sole purpose of providing concessionary loans to drought affected customers and is applicable to declared disaster areas as per the Government Gazette. Loans under this arrangement would only be extended where there is a viable business case with repayment ability, as well as sufficient collateral to cover the potential losses to the Bank. At 31 March 2020, R317m had been utilised with a further R83m available for qualifying projects. R ‘m 2020 Term loans - amortising Maturity date 1 925 10 year term loan - KFW 30 March 2028 840 15 year term loan – AfDB* 01 August 2027 690 25 year term loan - World Bank* 01 April 2043 395 Total development and multilateral funding 1 925 Drought relief Maturity date 10 year amortising term loan - IDC 31 March 2027 287 *100% government guaranteed DFI funding Preliminary unaudited credit information 6

Incurrence covenants The Land Bank is working on amending the covenants that exist in certain borrowing agreements. Existing financial covenants are being replaced with incurrence covenants and these incurrence covenants have been included in the new R38bn bond programme (“DMTN”). The incurrence covenants are aimed at correcting the gearing levels and short term debt levels by restricting additional gearing and restricting short term debt. Incurrence covenants (Banking level): I. Net Debt to Equity as a % to remain below 400% (the “Net Debt Incurrence Covenant”) - This covenant is applicable for all funding transactions over R100m other than for refinancing transactions II. Short-term Debt to total debt as a % to remain below 25% (the “Short -term debt Incurrence Covenant”) - This covenant needs to be complied with regardless of whether the funding transaction is for refinancing purposes or not i.e. the Land Bank cannot incur short term debt in a refinancing if it does not meet this covenant. The Land Bank may not incur borrowings if after taking into account such borrowings it will breach these incurrence covenants. Jun-20 Pro-forma Jun-20 Incurrence Covenants are tested prior to borrowing • being incurred and therefore are more effective than Post Equity Injection Net Debt to Equity (Banking level) backward looking financial covenants. Current & 5% liability reduction Covenants are tested at a banking level and equity • included is only actual capital and reserves. Cash 1 973 1 973 Liabilities 41 501 38 678 The table on the left indicates that the Land Bank will • be unable to incur further debt (other than Net Debt 39 528 36 705 refinancing existing debt) until either or both equity Capital and reserves 3 074 6 074 and reserves increases or net debt reduces significantly to below the 400% level. Net Debt to Equity 1 286% 604% Preliminary unaudited credit information 7

Incurrence covenants 60% 50% 40% 30% 25% 20% 10% 0% Nov 20 Dec 20 Jan 21 Feb 21 Mar 21 Apr 21 May 21 Jun 21 Jul 21 Aug 21 Sep 21 Oct 21 Nov 21 Dec 21 Jan 22 • When the Short-term debt Incurrence Covenant of 25% is reached this would have the effect of significantly improving the Net Stable Funding Ratio (to c.130%). Assumed that liability Illustrative example of the short- solution is implemented term debt to total debt calculated • The Short-term debt incurrence covenant is expected to peak at 49% in in Oct 2021 the medium term: Short-term debt to November 2022 19 453 Oct-21 is an indicative peak period reflecting 13 month short-term ‒ debt to Nov-22 which includes the maturities of the new LBG01, Total Debt 39 426 LBG02, LBG50 (Old LBK20) bonds and other capital amortisations Short term debt to total debt 49% ‒ When this ratio is in excess of 25%, the Land Bank would not be able to refinance any maturing debt with new short term debt. This ratio improves after the new LBG01 bond is repaid Preliminary unaudited credit information 8

Outline 1. Overview 2. Debt profile as at 31 March 2020 3. Distributions and Collections / Cash flow forecast 4. Summary of the Liability Solution Preliminary unaudited credit information 9