JOHANNESBURG (Reuters) – South Africa’s African Bank Investments said on Monday it was in talks to sell its loss-making Ellerines unit, a furniture selling business the unsecured lender has been trying to shed.
Its shares soared more than 15 percent to 7.75 rand on the rare piece of good news for the company, which has seen its bad loans spiral as its low-income client base struggles in the face of a sickly economy which contracted in the first quarter.
Shares of Abil, as the company is widely known, are still down around 37 percent so far this year, underscoring the depth of its woes.
Abil bought Ellerines in 2007 for 10.6 billion rand ($980.50 million) to widen its product offering to include furniture sold on credit.
Abil makes most of its money from unsecured, higher risk, high-interest loans that are not backed by collateral.
The bank reported a swing to a first half loss in May and its rating was also cut to below investment grade by Moody’s rating agency.
Abil has traditionally funded itself in the debt markets, so the downgrade could drive up the cost of its international borrowing.
($1 = 10.8108 South African Rand)
