By Kate Hennessy, Group Chief Financial Officer
What portion of the proceeds will go towards restructuring existing debts, and what portion will go towards growth activities?
The Bond and term loan package will be mainly used to refinance the group’s existing debt. A small portion will be leftover and that will go to support our growth strategy by scaling our infrastructure, investing in our people, and ensuring that our services meet the current customer needs by expanding our digital solutions offerings. Liquid Telecom is a digital solutions provider and we aim to build Africa’s digital future.
Because the coupon on the new Bond was tightened by 300bps to 5.5% from our initial Bond issuance coupon of 8.5%, that has also saved us real cash flow in interest costs which will improve the financial position of the group and drive forward more of our growth strategy.
Where does the group see the biggest growth opportunities? For instance, data centres, fibre etc.
We are very focused on areas that are underserved, a good example is our continued investment in the DRC but also in South Sudan. There are other interesting geographic expansions within Africa we are exploring. Additionally, we are expanding our array of offerings by providing businesses with access to more digital and Cloud-based services. In the future, digital companies that outpace the competition will do so because they are leaders at orchestrating a diverse ecosystem of producers, service providers, and customers to service new demand rapidly. They will also have the financial agility and effective contingency plans needed to respond, stabilise, recover, and reimagine growth.
The data centres are not within the bond and term loan restricted group. They have their own capital structure as their financing needs are extensive and couldn’t be accommodated beneath the restricted group.
Will this bond placement meaningfully lower the overall cost of capital for the group?
Yes, due to the lower coupon on the new Bond, it will meaningfully lower our cost of capital despite our total borrowings increasing. The ZAR term loan also assists us in hedging the FX volatility that we have suffered in the past by having all our debt in USD whilst a portion of our earnings was in ZAR and this should also assist in changing the risk outlook on the capital structure.
What types of investors showed an interest? i.e., European and US pension funds?
We saw strong interest from high-quality investors from the UK, US, Europe and Asia, in addition to the anchor orders from the IFC, DEG, and EAIF. The investor group was across the board from pension funds to investment funds to hedge funds. We value the strong group of loyal investors we have had in the Bond since the first issuance and we were pleased to see so many of them re-enter the new Bond.
Did Liquid Telecom do an investor roadshow? And are institutional investors growing more comfortable about the African growth story?
Yes, we met with more than 150 investors over two days of roadshows.
We believe that this outcome reflects the growing confidence in Liquid Telecom and African businesses more widely as we seek to drive sustainable growth and positive social change across the continent.