- The USD 90m injection is expected from three key investors
- The company will hold a roadshow in the coming days
- Advanced talks with banks for term loan refinancing
Liquid Telecommunications Holdings, the Mauritius-based telecommunications company, is in the legal documentation stage on the first tranche of USD 90m fresh equity, with final approvals in place from three key investors, management said during an earnings call today (27 June).
The equity round, 25% of which will flow into the company’s bond perimeter, includes an investment from the International Development Finance Corporation, alongside another DFI, and a strategic investor, management added.
Previously, management said that two American private equity and venture capital funds were to invest USD 225m in Cassava Technologies — a new holding entity to own the entire group — with the first tranche of USD 75m to have been placed by end-February, and the rest in two tranches by end-March and end-June.
This news service reported at the beginning of this month that holders of the company’s USD 620m 5.5% 2026 bonds were waiting for the company to release its financial results — and an update on its long-awaited equity injection — before deciding whether to organize into a group.
Commenting on the reasons why the equity injection has faced delays, management said the company made a mistake of being "overly optimistic" when announcing the equity injection back in October last year.
This has been a fairly difficult legal reorganization, given the complexities of the group, which took the company all the way to April, management noted.
In terms of further tranches, it is more likely than not that the company will end up with two tranches, management said, adding that it would possibly be able to provide further detail on the second tranche during the release of the company’s 1H25 financials.
The company will meet some of its investors during a roadshow in the next couple of days, management noted.
Slim covenant headroom
The company's 4Q24 (three-month period ended 29 February) revenue was USD 192.5m, 7.7% higher YoY, while adjusted EBITDA was USD 80.3m, a 1.5% reduction from 4Q23. The improved top line operational performance failed to translate to cashflow, as cash generated from operations was just USD 17.9m, 79% lower from 4Q23’s USD 85m, largely due to a USD 30m working capital (WC) build up in 4Q24, compared to a USD 30m WC release in 4Q23.
Free cash outflow during the quarter, including adverse FX movements, was USD 10m. Net debt grew to USD 893m, a sequential increase of over USD 30m. Net debt to EBITDA at 29 February was 3.47x, dangerously close to the company's 3.5x maintenance covenant threshold.
The bulk of the company’s debt is its outstanding 2026 notes, where the sole covenant is a debt incurrence ratio of 4.25x throughout life. However, one of the covenants of the company’s ZAR-denominated term loan and Revolving Credit Facility (RCF) stipulates that net leverage does not exceed 4x, stepping down to 3.5x in February, and then to 3x in August this year.
Management also offered provisional 1Q25 financial results with net debt ballooning even further to USD 931m, with leverage remaining broadly flat sequentially, at 3.46x, against the 3.5x threshold. Liquid Telecom’s USD 979.1m gross debt comprises the company’s 2026 bond, the term loan, USD 4m of Zambian debt, USD 164m of lease liabilities, and USD 50m of RCF drawdown.
In terms of FY25 guidance, the company's management expects good growth in the local currency and more stability in FX levels, with an internal focus on USD revenue, an improved operating leverage and approximately USD 10m reduction in overheads relative to FY24. FY25 capex is guided at USD 70-80m.
The company is aware of the step-down in August, and is very much focused on that, noted management. There has been a strong underlying growth within the business, which the company expects to continue.
Other contributing factors mentioned by management towards achieving the 3x leverage threshold are the cash collections and the equity injection, management said. Moreover, looking at the last 12 months, the company is expecting stronger results from Zimbabwe, management added.
Liquid Telecom has seen a slight deterioration in its receivables collections in recent months, and the company is trying to improve this issue, said management, adding that the company expects the EBITDA growth to convert to cash very soon.
Term loan refinancing
The company is also making good progress on the refinancing of its ZAR-denominated term loan, which whilst partially amortizing, becomes current in February 2025, said management.
Advanced discussions with selected existing lenders, including the IFC, are ongoing, based on a full refinancing rather than an extension, management said.
Liquid Telecom’s debt servicing is around USD 70-75m each year, with its large maturity wall being FY27, as reported. The company’s refinancing plan is to move away from a single maturity, reduce its gross debt and increase ZAR-denominated borrowing, in line with its operating business.
The company is working on putting in place a 10-year tranche, noted the management, adding that there is a possibility to upsize the current balance, which stood at USD 146m at the end of May.
The company’s base case is that it would pay the 15% amortization, which is roughly around USD 4-5m, due in September, depending on when the refinancing negotiations are finalized, noted management.
Forty percent of the company’s shareholders are DFIs, including British International Investment, the International Financial Corporation (IFC), Afreximbank and Royal Bafokeng Holdings (RBH), according to the company’s latest financial presentation model, as reported.
by Asli Orbay-Graves, with assistance from Nik Stefanou