Borrowings

12 Months Ended

Jun. 30, 2020

13. Borrowings

South Africa

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

July 2017 Facilities, as amended, comprising a short-term facility and long-term borrowings

Long-term borrowings – Facilities A, B, C and D (these facilities have been repaid and cancelled)

On July 21, 2017, Net1 SA entered into a Common Terms Agreement, Senior Facility A Agreement, Senior Facility B Agreement, Senior Facility C Agreement, Subordination Agreement, Security Cession & Pledge and certain ancillary loan documents (collectively, the “Original Loan Documents”) with RMB, a South African corporate and investment bank, and Nedbank Limited (acting through its Corporate and Investment Banking division), an African corporate and investment bank (collectively, the “Lenders”), pursuant to which, among other things, Net1 SA may borrow up to an aggregate of ZAR 1.25 billion to finance a portion of its investment in Cell C and to fund its on-going working capital requirements. On March 8, 2018, the Company amended its South African long-term facility to include an additional term loan, Facility D, of up to ZAR 210.0 million. All amounts under these facilities were repaid in full during the year ended June 30, 2019.

On September 4, 2019, Net1 SA further amended the July 2017 Facilities agreement, which included adding Main Street 1692 (RF) Proprietary Limited (“Debt Guarantor”), a South African company incorporated for the sole purpose of holding collateral for the benefit of the Lenders and acting as debt guarantor. The covenants were also amended and now include customary covenants that require Net1 SA to maintain a specified total asset cover ratio and restrict the ability of Net1 SA, and certain of its subsidiaries to make certain distributions with respect to their capital stock, prepay other debt, encumber their assets, incur additional indebtedness, make investment above specified levels, engage in certain business combinations and engage in other corporate activities. Net1 also agreed that in the event of any sale of KSNET, Inc., it would deposit a portion of the proceeds in an amount of the USD equivalent of the Facility F loan and the Nedbank general banking facility commitment into a bank account secured in favor of the Debt Guarantor. Net1 SA also entered into a pledge and cession agreement with the Debt Guarantor pursuant to which, among other things, Net1 SA agreed to cede its shareholdings in Cell C, DNI and Net1 FIHRST Holdings (Pty) Ltd to the Debt Guarantor. The shareholdings in DNI and Net 1 FIHRST Holdings (Pty) Ltd were released pursuant to the transactions to dispose of these investments.

Short-term facility - Facility E

On September 26, 2018, Net1 SA further revised its amended July 2017 Facilities agreement with RMB to include an overdraft facility (“Facility E”) of up to ZAR 1.5 billion ($83.8 million, translated at exchange rates applicable as of June 30, 2020) to fund the Company’s ATMs. The Facility E overdraft facility was subsequently reduced to ZAR 1,2 billion ($69,2 million, translated at exchange rates applicable as of June 30, 2020) in September 2019. Interest on the overdraft facility is payable on the last day of each month and on the final maturity date based on the South African prime rate. The overdraft facility will be reviewed in September 2020. The overdraft facility amount utilized must be repaid in full within one month of utilization and at least 90% of the amount utilized must be repaid with 25 days. The overdraft facility is secured by a pledge by Net1 SA of, among other things, cash and certain bank accounts utilized in the Company’s ATM funding process, the cession of an insurance policy with Senate Transit Underwriters Managers Proprietary Limited, and any rights and claims Net1 SA has against Grindrod Bank Limited. As at June 30, 2020, the Company had utilized approximately ZAR 0,3 billion ($14,8 million) of this overdraft facility. This ZAR 1,2 billion 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 prime rate on June 30, 2020, was 7,25% and reduced to 7,00% on July 24, 2020, following reductions in the South African repo rate.

Short-term borrowings facility - Facility F (this facility has been repaid and cancelled)

13. Borrowings (continued)

On September 4, 2019, Net1 SA further amended its amended July 2017 Facilities agreement with RMB and Nedbank to include a facility (“Facility F”) of up to ZAR 300,0 million ($17,3 million, translated at exchange rates applicable as of June 30, 2020) for the sole purpose of funding the acquisition of airtime from Cell C. Net1 SA could not dispose of the airtime acquired from Cell C before April 1, 2020, without the prior consent of RMB, Absa Bank Limited and Investec Asset Management Proprietary Limited. Facility F comprised (i) a first Senior Facility F loan of ZAR 220,0 million (ii) a second Senior Facility F loan of ZAR 80,0 million, or such lesser amount as may be agreed by the facility agent. The first loan was utilized on September 5, 2019, while the second loan was never utilized. Facility F was required to be repaid in full within nine months following the first utilization of the facility. Net1 SA was required to prepay Facility F subject to customary prepayment terms. Interest on Facility F was based on JIBAR plus a margin of 5,50% per annum and was due in full on repayment of the loan. The margin on the Facility F increased by 1% on November 1, 2019, because the Company had not disposed of its remaining shareholding in DNI and FIHRST by that date. Net1 SA paid a non-refundable structuring fee of ZAR 2.2 million ($0.1 million) to the Lenders in September 2019, and the Company expensed this amount in full during the first quarter of fiscal 2020. The Company settled the facility in full on April 1, 2020, utilizing a portion of the proceeds received from the sale of its remaining stake in DNI, and the facility was cancelled.

Nedbank facility, comprising short-term facilities

As of June 30, 2020, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited was ZAR 450,0 million ($26,0 million). The credit facility comprises an overdraft facility of (i) up to ZAR 300,0 million ($17,3 million), which is further split into (a) a ZAR 250,0 million ($14,4 million) overdraft facility which may only be used to fund mobile ATMs and (b) a ZAR 50,0 million ($2,9 million) general banking facility and (ii) indirect and derivative facilities of up to ZAR 150,0 million ($8,7 million), which include guarantees, letters of credit and forward exchange contracts. The ZAR 250,0 million component of the primary amount may only be used to fund ATMs and therefore this component of the primary amount utilized and converted to cash to fund the Company’s ATMs is considered restricted cash.

The Company has ceded all of its title and interest in an insurance policy issued by Fidelity Risk Proprietary Limited as security for its repayment obligations under the facility. A commitment fee of 0.35% per annum is payable on the monthly unutilized amount of the overdraft portion of the short-term facility. The Company is required to comply with customary non-financial covenants, including, without limitation, covenants that restrict its ability to dispose of or encumber its assets, incur additional indebtedness or engage in certain business combinations. The short-term facility provides Nedbank with the right to set off funds held in certain identified Company bank accounts with Nedbank against any amounts owed to Nedbank under the facility. As of June 30, 2020, the Company had total funds of $12,4 million in bank accounts with Nedbank which have been set off against $12,4 million drawn under the Nedbank facility, for a net amount drawn under the facility of $0,1 million. As of June 30, 2019, the Company had total funds of $2.7 million in bank accounts with Nedbank which have been set off against $8.6 million drawn under the Nedbank facility, for a net amount drawn under the facility of $5.9 million. As of June 30, 2020, the interest rate on the overdraft facility was 6,10%, and reduced to 5,85% on July 24, 2020, following reductions in the South African repo rate.

As of June 30, 2020, the Company had utilized approximately ZAR 1,0 million ($0,1 million) of its ZAR 300,0 million overdraft facility to fund ATMs, and none of its ZAR 50,0 million general banking facility. As of June 30, 2019, the Company has utilized approximately ZAR 82.8 million ($5.9 million) of its ZAR 250 million overdraft facility to fund ATMs and utilized none of its ZAR 50 million general banking facility. As of June 30, 2020 and June 30, 2019, the Company had utilized approximately ZAR 93,6 million ($5,4 million) and ZAR 93.6 million ($6.6 million), respectively, of its indirect and derivative facilities of ZAR 150 million to enable the bank to issue guarantees, letters of credit and forward exchange contracts, in order for the Company to honor its obligations to third parties requiring such guarantees (refer to Note 23).

United States, a short-term facility (this facility has been repaid and cancelled)

On September 14, 2018, the Company renewed its $10.0 million overdraft facility from Bank Frick and on February 4, 2019, the Company increased the overdraft facility to $20.0 million. As of June 30, 2019, the Company had utilized approximately $9.5 million of this facility. The Company’s $20 million facility from Bank Frick was settled in full and cancelled in March 2020. The facility was secured by a pledge of the Company’s investment in Bank Frick and the shares under the pledge were released upon cancellation.

Movement in short-term credit facilities

Summarized below are the Company’s short-term facilities as of June 30, 2020, and the movement in the Company’s short-term facilities from as of June 30, 2019 to as of

13. Borrowings

South Africa

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

July 2017 Facilities, as amended, comprising a short-term facility and long-term borrowings

Long-term borrowings – Facilities A, B, C and D (these facilities have been repaid and cancelled)

Short-term facility - Facility E

Short-term borrowings facility - Facility F (this facility has been repaid and cancelled)

13. Borrowings (continued)

Nedbank facility, comprising short-term facilities

United States, a short-term facility (this facility has been repaid and cancelled)

Movement in short-term credit facilities

Summarized below are the Company’s short-term facilities as of June 30, 2020, and the movement in the Company’s short-term facilities from as of June 30, 2019 to as of June 30, 2020:

					South Africa				United States
					Amended July 2017		Nedbank		Bank Frick		Total
Short-term facilities available as of
June 30, 2020				$	69 234	$	25 963	$	-	$	95 197
	Overdraft				-		2 885		-		2 885
	Overdraft restricted as to use for ATM funding only				69 234		14 424		-		83 658
	Indirect and derivative facilities				-		8 654		-		8 654

Movement in utilized overdraft facilities:
		Utilized			722 375		85 843		14 536		822 754
		Repaid			(655 612)		(80 365)		(4 992)		(740 969)
		Foreign currency adjustment⁽¹⁾			2 803		402		-		3 205
	Balance as of June 30, 2019⁽²⁾				69 566		5 880		9 544		84 990
			Restricted as to use for ATM funding only		69 566		5 880		-		75 446
			No restrictions as to use		-		-		9 544		9 544
		Utilized			603 134		69 245		17 384		689 763
		Repaid			(647 990)		(73 017)		(26 928)		(747 935)
		Foreign currency adjustment⁽¹⁾			(9 954)		(2 050)		-		(12 004)
	Balance as of June 30, 2020⁽³⁾				14 756		58		-		14 814
			Restricted as to use for ATM funding only		14 756		58		-		14 814
			No restrictions as to use		-		-		-		-

Movement in utilized indirect and derivative facilities:
	Balance as of June 30, 2018				-		7 871		-		7 871
		Guarantees cancelled			-		(1 075)		-		(1 075)
		Utilized			-		46		-		46
		Foreign currency adjustment⁽¹⁾			-		(199)		-		(199)
	Balance as of June 30, 2019				-		6 643		-		6 643
		Foreign currency adjustment⁽¹⁾			-		(1 245)		-		(1 245)
	Balance as of June 30, 2020			$	-	$	5 398	$	-	$	5 398

					South Africa				United States
					Amended July 2017		Nedbank		Bank Frick		Total
Short-term facilities available as of
June 30, 2020				$	69 234	$	25 963	$	-	$	95 197
	Overdraft				-		2 885		-		2 885
	Overdraft restricted as to use for ATM funding only				69 234		14 424		-		83 658
	Indirect and derivative facilities				-		8 654		-		8 654

Movement in utilized overdraft facilities:
		Utilized			722 375		85 843		14 536		822 754
		Repaid			(655 612)		(80 365)		(4 992)		(740 969)
		Foreign currency adjustment⁽¹⁾			2 803		402		-		3 205
	Balance as of June 30, 2019⁽²⁾				69 566		5 880		9 544		84 990
			Restricted as to use for ATM funding only		69 566		5 880		-		75 446
			No restrictions as to use		-		-		9 544		9 544
		Utilized			603 134		69 245		17 384		689 763
		Repaid			(647 990)		(73 017)		(26 928)		(747 935)
		Foreign currency adjustment⁽¹⁾			(9 954)		(2 050)		-		(12 004)
	Balance as of June 30, 2020⁽³⁾				14 756		58		-		14 814
			Restricted as to use for ATM funding only		14 756		58		-		14 814
			No restrictions as to use		-		-		-		-

Movement in utilized indirect and derivative facilities:
	Balance as of June 30, 2018				-		7 871		-		7 871
		Guarantees cancelled			-		(1 075)		-		(1 075)
		Utilized			-		46		-		46
		Foreign currency adjustment⁽¹⁾			-		(199)		-		(199)
	Balance as of June 30, 2019				-		6 643		-		6 643
		Foreign currency adjustment⁽¹⁾			-		(1 245)		-		(1 245)
	Balance as of June 30, 2020			$	-	$	5 398	$	-	$	5 398

13. Borrowings (continued)

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

(2) Nedbank as of June 30, 2019, of $5.9 million comprises the net of total overdraft facilities withdrawn of $8.6 million offset against funds in bank accounts with Nedbank of $2.7 million.

(3) As of June 30, 2020, there were no amounts offset against the Nedbank overdraft facilities.

Movement in long-term borrowings

Summarized below is the movement in the Company’s long term borrowing from as of June 30, 2018, to as of June 30, 2020:

			South Africa
			Amended July 2017		Total
Balance as of July 1, 2018			$	49 548	$	49 548
	Current portion of long-term borrowings			44 079		44 079
	Long-term borrowings			5 469		5 469
		Repaid		(31 844)		(31 844)
		Repaid from sale of DNI shares (Note 10)		(15 011)		(15 011)
		Foreign currency adjustment⁽¹⁾		(2 693)		(2 693)
Balance as of June 30, 2019				-		-
		Utilized		14 798		14 798
		Repaid		(14 503)		(14 503)
		Foreign currency adjustment⁽¹⁾		(295)		(295)
Balance as of June 30, 2020			$	-	$	-

			South Africa
			Amended July 2017		Total
Balance as of July 1, 2018			$	49 548	$	49 548
	Current portion of long-term borrowings			44 079		44 079
	Long-term borrowings			5 469		5 469
		Repaid		(31 844)		(31 844)
		Repaid from sale of DNI shares (Note 10)		(15 011)		(15 011)
		Foreign currency adjustment⁽¹⁾		(2 693)		(2 693)
Balance as of June 30, 2019				-		-
		Utilized		14 798		14 798
		Repaid		(14 503)		(14 503)
		Foreign currency adjustment⁽¹⁾		(295)		(295)
Balance as of June 30, 2020			$	-	$	-

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

Interest expense incurred under the Company’s South African long-term borrowing during the years ended June 30, 2020, 2019, and 2018, was $0,6 million, $2,9 million, and $7.2 million, respectively. There was no prepaid facility fee amortization during the year ended June 30, 2020. Prepaid facility fees amortized during the years ended June 30, 2019, and 2018, was $0,3 million and $0.5 million, respectively. Net1 SA paid non-refundable deal origination fees of approximately $0.6 million and $0.2 million in August 2017 and March 2018, respectively.

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