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Borrowings
 9 Months Ended
Mar. 31, 2023
Borrowings [Abstract]  
Borrowings

8.Borrowings

 

Refer to Note 12 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022, for additional information regarding its borrowings.

 

South Africa

 

The amounts below have been translated at exchange rates applicable as of the dates specified.

 

RMB Facilities, as amended, comprising a short-term facility (Facility E) and long-term borrowings

 

Long-term borrowings - Facility G and Facility H

 

On March 16, 2023, the Company, through Lesaka Technologies (Pty) Ltd (“Lesaka SA”), entered into a Fifth Amendment and Restatement Agreement, which includes, among other agreements, an Amended and Restated Common Terms Agreement (“CTA”), an Amended and Restated Senior Facility G Agreement (“Facility G Agreement”) and an Amended and Restated Senior Facility H Agreement (“Facility H Agreement”) (collectively, the “Loan Documents”) with FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB” or the “Lenders”).

 

Amendments to the CTA include an amendment to the asset cover ratio to change the Covenant Equity Value (as defined in the CTA) definition to include 90% of the book value of the Moneyline Financial Service Proprietary Limited receivables, and to deduct the net debt (as defined in the CTA) of Cash Connect Management Solutions Proprietary Limited (“CCMS”) and K2021 Proprietary Limited (“K2021”) from the respective CCMS and K2021 valuations. When determining the Covenant Equity Value, the value of the aggregate of the CCMS Equity Value (as defined in the CTA) and the K2021 Equity Value (as defined in the CTA) must be at least 50 per cent of the Covenant Equity Value. To the extent that the value of the aggregate of the CCMS Equity Value and the K2021 Equity Value is not at least 50 per cent of the Covenant Equity Value, the Covenant Equity Value will be reduced so that the aggregate of the CCMS Equity Value and the K2021 Equity Value is 50 per cent of the Covenant Equity Value. The amendments also include the removal of a requirement to maintain a minimum group cash balance.

 

Pursuant to the Facility G Agreement, Lesaka SA may borrow up to an aggregate of approximately ZAR 708.6 million. Facility G now includes a term loan of ZAR 508.6 million and a revolving credit facility of up to ZAR 200 million. Pursuant to the Facility H Agreement, Lesaka SA may borrow up to an aggregate of approximately ZAR 357.4 million. Interest on Facility G and Facility H (together, the “Facilities”) is based on the 3-month Johannesburg Interbank Agreed Rate (“JIBAR”) in effect from time to time plus a margin, as a result of the amendment, from January 1, 2023 of: (i) 5.50% for as long as the aggregate balance under the Facilities is greater than ZAR 800 million; (ii) 4.25% if the aggregate balance under the Facilities is equal to or less than ZAR 800 million, but greater than ZAR 350 million; or (iii) 2.50% if the aggregate balance under the Facilities is less than ZAR 350 million.

 

Interest on the Facilities may be capitalized to each of the facilities, and will be repaid on the maturity date, provided that the sum of the outstanding facility (including interest and fees) plus any accrued interest does not exceed 1.2 times of the Facilities outstanding balance. Any interest that exceeds this cap must be settled in full on a quarterly basis.

 

Lesaka SA will pay a quarterly commitment fee computed at a rate of 35% of the Applicable Margin (as defined in the CTA) on the amount of the revolving credit facility outstanding and such commitment fee will also be capitalized, subject to the cap discussed above.

 

Available short-term facility - Facility E

 

As of March 31, 2023, the aggregate amount of the Company’s short-term South African overdraft facility with RMB was ZAR 1.4 billion ($78.7 million). As of March 31, 2023, the Company had utilized approximately ZAR 0.7 billion ($37.7 million) of this overdraft facility. This overdraft facility may only be used to fund ATMs and therefore the overdraft utilized and converted to cash to fund the Company’s ATMs is considered restricted cash. The interest rate on this facility is equal to the prime rate. The prime rate on March 31, 2023, was 11.25%.

 

Connect Facilities, comprising long-term borrowings and a short-term facility

 

As of March 31, 2023, the Connect Facilities include (i) an overdraft facility (general banking facility) of ZAR 205.0 million (of which ZAR 170.0 million has been utilized); (ii) Facility A of ZAR 700.0 million; (iii) Facility B of ZAR 550.0 million (both fully utilized); and (iv) an asset-backed facility of ZAR 200.0 million (of which ZAR 139.2 million has been utilized).

 

In February 2023, the Company, through CCMS, obtained a ZAR 175.0 million temporary increase in its overdraft facility for a period of four months to specifically fund the purchase of prepaid airtime vouchers. This temporary increase is repayable in four equal monthly instalments of ZAR 43.8 million and which commenced in March 2023. Interest at the South Africa prime rate less 0.1% is payable on a monthly basis.

 

8.Borrowings (continued)

 

South Africa (continued)

 

Connect Facilities, comprising long-term borrowings and a short-term facility (continued)

 

On March 22, 2023, the Company, through CCMS, entered into a First Amendment and Restatement Agreement, which includes, among other agreements, an Amended and Restated Facilities Agreement (“CCMS Facilities Agreement”) with RMB. The CCMS Facilities Agreement was amended to increase the Facility B available under the CCMS Facilities Agreement by ZAR 200.0 million to ZAR 550.0 million. The final maturity date has been extended to December 31, 2027, and scheduled principal repayments have been amended, with the first scheduled repayment commencing from March 31, 2026.

 

CCC Revolving Credit Facility, comprising long-term borrowings

 

On November 29, 2022, the Company, through its indirect South African subsidiary Cash Connect Capital (Pty) Limited (“CCC”), entered into a Revolving Credit Facility Agreement (the “Loan Document”) with RMB and other Company subsidiaries within the Connect Group of companies listed therein, as guarantors. The transaction closed on December 1, 2022.

 

The Loan Document contains customary covenants that require CCC and K2020 to collectively maintain a specified capital adequacy ratio, restrict the ability of the entities to make certain distributions with respect to their capital stock, encumber their assets, incur additional indebtedness, make investments, engage in certain business combinations and engage in other corporate activities.

 

Pursuant to the Loan Document, CCC may borrow up to an aggregate of ZAR 300.0 million (“CCC Revolving Credit Facility”) for the sole purposes of funding CCC’s consumer lending business, providing a limited recourse loan to K2020, settling up to ZAR 35.0 million related to an intercompany loan to CCC’s direct parent, and paying the structuring and execution fee and legal costs. The Revolving Credit Facility replaces K2020’s existing lending arrangement and increases the borrowings available to facilitate further growth of the business.

 

Interest on the Revolving Credit Facility is payable on the last business day of each calendar month and is based on the South African prime rate in effect from time to time plus a margin of 0.95% per annum.

 

The Company paid a non-refundable structuring and execution fee of ZAR 1.7 million, or $0.1 million, including value added taxation, to the Lenders on closing.

 

As of March 31, 2023, the amount of the CCC Revolving Credit Facility was ZAR 300.0 million (of which ZAR 245.5 million has been utilized).

 

RMB facility, comprising indirect facilities

 

As of March 31, 2023, the aggregate amount of the Company’s short-term South African indirect credit facility with RMB was ZAR 135.0 million ($7.6 million), which includes facilities for guarantees, letters of credit and forward exchange contracts. As of March 31, 2023 and June 30, 2022, the Company had utilized approximately ZAR 33.1 million ($1.9 million) and ZAR 5.1 million ($0.3 million), respectively, of its indirect and derivative facilities of ZAR 135.0 million (June 30, 2022: ZAR 135.0 million) to enable the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 19).

 

Nedbank facility, comprising short-term facilities

 

As of March 31, 2023, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited was ZAR 156.6 million ($8.8 million). The credit facility represents indirect and derivative facilities of up to ZAR 156.6 million ($8.8 million), which include guarantees, letters of credit and forward exchange contracts.

 

As of March 31, 2023 and June 30, 2022, the Company had utilized approximately ZAR 2.1 million ($0.1 million) and ZAR 92.1 million ($5.7 million), respectively, of its indirect and derivative facilities of ZAR 156.6 million (June 30, 2022: ZAR 156.6 million) to enable the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 19).

8.Borrowings (continued)

 

Movement in short-term credit facilities

 

Summarized below are the Company’s short-term facilities as of March 31, 2023, and the movement in the Company’s short-term facilities from as of June 30, 2022 to as of March 31, 2023:

 

 

 

 

 

 

RMB

 

RMB

 

RMB

 

Nedbank

 

 

 

 

 

 

 

 

 

Facility E

 

Indirect

 

Connect(4)

 

Facilities

 

Total

 

Short-term facilities available as of March 31, 2023

$

78,680

 

$

7,587

 

$

11,521

 

$

8,798

 

$

106,586

 

 

Overdraft

 

-

 

 

-

 

 

11,521

 

 

-

 

 

11,521

 

 

Overdraft restricted as to use for ATM funding only

 

78,680

 

 

-

 

 

-

 

 

-

 

 

78,680

 

 

Indirect and derivative facilities

 

-

 

 

7,587

 

 

-

 

 

8,798

 

 

16,385

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Movement in utilized overdraft facilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted as to use for ATM funding only

 

51,338

 

 

-

 

 

-

 

 

-

 

 

51,338

 

 

No restrictions as to use

 

-

 

 

-

 

 

14,880

 

 

-

 

 

14,880

 

 

 

Balance as of June 30, 2022

 

51,338

 

 

-

 

 

14,880

 

 

-

 

 

66,218

 

 

 

 

Utilized

 

431,150

 

 

-

 

 

10,338

 

 

-

 

 

441,488

 

 

 

 

Repaid

 

(441,083)

 

 

-

 

 

(7,205)

 

 

-

 

 

(448,288)

 

 

 

 

Foreign currency adjustment(1)

 

(3,674)

 

 

-

 

 

(1,083)

 

 

-

 

 

(4,757)

 

 

Balance as of March 31, 2023

 

37,731

 

 

-

 

 

16,930

 

 

-

 

 

54,661

 

 

 

 

Restricted as to use for ATM funding only

 

37,731

 

 

-

 

 

-

 

 

-

 

 

37,731

 

 

 

 

No restrictions as to use

$

-

 

$

-

 

$

16,930

 

$

-

 

$

16,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate as of March 31, 2023 (%)(2)

 

11.25

 

 

-

 

 

11.15

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Movement in utilized indirect and derivative facilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of June 30, 2022

$

-

 

$

313

 

$

-

 

$

5,654

 

$

5,967

 

 

 

Guarantees cancelled(3)

 

-

 

 

-

 

 

-

 

 

(5,171)

 

 

(5,171)

 

 

 

Utilized

 

-

 

 

1,609

 

 

-

 

 

-

 

 

1,609

 

 

 

Foreign currency adjustment(1)

 

-

 

 

(62)

 

 

-

 

 

(364)

 

 

(426)

 

 

Balance as of March 31, 2023

$

-

 

$

1,860

 

$

-

 

$

119

 

$

1,979

(1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.

(2) Facility E interest set at prime and the Connect facility at prime less 0.10%.

(3) Represents the cancellation of the guarantee with supplier amounting to ZAR 90 million ($5.2 million) which is no longer required due the reduction in the volume and value of transactions processed.

(4) The amount available under this facility excludes the ZAR 175.0 million temporary facility obtained in February 2023. The balance outstanding as of March 31, 2023, includes the outstanding balance of ZAR 131.25 million (or $7.4 million utilizing the exchange rate as of March 31, 2023) related to this temporary facility.

 

 

8.Borrowings (continued)

 

Movement in long-term borrowings

 

Summarized below is the movement in the Company’s long-term borrowing from as of as of June 30, 2022 to as of March 31, 2023:

 

 

 

 

 

Facilities

 

 

 

 

 

 

 

 

G & H

 

A&B

 

K2020/ CCC

 

Asset backed

 

Total

 

Included in current

$

-

 

$

4,604

 

$

-

 

$

2,200

 

$

6,804

 

Included in long-term

 

63,354

 

 

59,868

 

 

8,346

 

 

3,274

 

 

134,842

 

Opening balance as of June 30, 2022

 

63,354

 

 

64,472

 

 

8,346

 

 

5,474

 

 

141,646

 

 

Facilities utilized

 

-

 

 

10,947

 

 

7,377

 

 

4,686

 

 

23,010

 

 

Facilities repaid

 

(322)

 

 

(2,151)

 

 

(985)

 

 

(1,834)

 

 

(5,292)

 

 

Non-refundable fees paid

 

(500)

 

 

-

 

 

(100)

 

 

-

 

 

(600)

 

 

Non-refundable fees amortized

 

565

 

 

45

 

 

32

 

 

-

 

 

642

 

 

Capitalized interest

 

3,261

 

 

-

 

 

-

 

 

-

 

 

3,261

 

 

Capitalized interest repaid

 

(12)

 

 

-

 

 

-

 

 

-

 

 

(12)

 

 

Foreign currency adjustment(1)

 

(5,378)

 

 

(5,108)

 

 

(952)

 

 

(504)

 

 

(11,942)

 

 

 

Closing balance as of March 31, 2023

 

60,968

 

 

68,205

 

 

13,718

 

 

7,822

 

 

150,713

 

 

 

Included in current

 

-

 

 

-

 

 

-

 

 

3,515

 

 

3,515

 

 

 

Included in long-term

 

60,968

 

 

68,205

 

 

13,718

 

 

4,307

 

 

147,198

 

 

 

 

Unamortized fees

 

(840)

 

 

(248)

 

 

(81)

 

 

-

 

 

(1,169)

 

 

 

 

Due within 2 years

 

-

 

 

-

 

 

13,799

 

 

3,025

 

 

16,824

 

 

 

 

Due within 3 years

 

61,808

 

 

1,756

 

 

-

 

 

1,194

 

 

64,758

 

 

 

 

Due within 4 years

 

-

 

 

7,377

 

 

-

 

 

88

 

 

7,465

 

 

 

 

Due within 5 years

$

-

 

$

59,320

 

$

-

 

$

-

 

$

59,320

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rates as of March 31, 2023 (%):

 

13.46

 

 

11.71

 

 

12.20

 

 

12.00

 

 

 

 

 

Base rate (%)

 

7.96

 

 

7.96

 

 

11.25

 

 

11.25

 

 

 

 

 

Margin (%)

 

5.50

 

 

3.75

 

 

0.95

 

 

0.75

 

 

 

 

Footnote number

 

(2)(3)(4)

 

 

(5)

 

 

(6)

 

 

(7)

 

 

 

(1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.

(2) Prior to the amendment in March 2023, interest on Facility G was calculated based on the 3-month JIBAR in effect from time to time plus a margin of (i) 3.00% per annum until January 13, 2023; and then (ii) from January 14, 2023, (x) 2.50% per annum if the Facility G balance outstanding is less than or equal to ZAR 250.0 million, or (y) 3.00% per annum if the Facility G balance is between ZAR 250.0 million to ZAR 450.0 million, or (z) 3.50% per annum if the Facility G balance is greater than ZAR 450.0 million. The interest rate shall increase by a further 2.00% per annum in the event of default (as defined in the Loan Documents).

(3) Prior to the amendment in March 2023, interest on Facility H is calculated based on JIBAR in effect from time to time plus a margin of 2.00% per annum which increases by a further 2.00% per annum in the event of default (as defined in the Loan Documents).

(4) Interest on Facility G and Facility H is calculated based on the 3-month JIBAR in effect from time to time plus a margin of, from January 1, 2023: (i) 5.50% for as long as the aggregate balance under the Facilities is greater than ZAR 800 million; (ii) 4.25% if the aggregate balance under the Facilities is equal to or less than ZAR 800 million, but greater than ZAR 350 million; or (iii) 2.50% if the aggregate balance under the Facilities is less than ZAR 350 million

(5) Interest on Facility A and Facility B is calculated based on JIBAR plus a margin, of 3.75%, in effect from time to time.

(6) Interest is charged at prime plus 0.95% per annum on the utilized balance.

(7) Interest is charged at prime plus 0.75% per annum on the utilized balance.

 

Interest expense incurred under the Company’s South African long-term borrowings and included in the caption interest expense on the condensed consolidated statement of operations during the three and nine months ended March 31, 2023, was $3.0 million and $9.2 million, respectively. There was no interest expense incurred during the three and nine months ended March 31, 2022. Prepaid facility fees amortized included in interest expense during the three and nine months ended March 31, 2023, were $0.2 million and $0.6 million, respectively. There was no prepaid facility fee amortization during the three and nine months ended March 31, 2022. Interest expense incurred under the Company’s K2020 and CCC facilities relates to borrowings utilized to fund a portion of the Company’s merchant finance loans receivable and this interest expense of $0.3 million and $1.0 million, respectively, is included in the caption cost of goods sold, IT processing, servicing and support on the condensed consolidated statement of operations for the three and nine months ended March 31, 2023.