Borrowings

12 Months Ended

Jun. 30, 2022

Borrowings [Abstract]

Borrowings

12.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

On July 21, 2017, Lesaka SA entered into a Common Terms 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”). Since 2017, these agreements have been amended to add additional facilities, including Facilities G and H, which were obtained to finance the acquisition of Connect (refer to Note 3). Facilities A, B, C, D and F have been repaid and cancelled. As of June 30, 2022, the only remaining facilities are Facility G and Facility H (as defined below), and Facility E, an overdraft facility.

Available short-term facility - Facility E

On September 26, 2018, Lesaka SA revised its amended July 2017 Facilities agreement with RMB to include Facility E, an overdraft facility of up to ZAR 1.5 billion ($92.1 million, translated at exchange rates applicable as of June 30, 2022) to fund the cash in the Company’s ATMs. The Facility E overdraft facility was subsequently reduced to ZAR 1.2 billion ($73.7 million, translated at exchange rates applicable as of June 30, 2022) in September 2019. On August 2, 2021, Lesaka SA and RMB entered into a Letter of Amendment to increase Facility E from ZAR 1.2 billion to ZAR 1.4 billion ($85.9 million, translated at exchange rates applicable as of June 30, 2022). Interest on the overdraft facility is payable on the first day of the month following utilization of the facility and on the final maturity date based on the South African prime rate. 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 within 25 days. The overdraft facility is secured by a pledge by Lesaka SA of, among other things, cash and certain bank accounts utilized in the Company’s ATM funding process, the cession of Lesaka SA’s shareholding in Cell C, the cession of an insurance policy with Senate Transit Underwriters Managers Proprietary Limited, and any rights and claims Lesaka SA has against Grindrod Bank Limited. As at June 30, 2022, the Company had utilized approximately ZAR 0.8 billion ($51.3 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 prime rate on June 30, 2022, was 8.25%, and increased to 9.00% on July 22, 2022, following an increase in the South African repo rate.

12.Borrowings (continued)

South Africa (continued)

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

Long-term borrowings - Facility G and Facility H

On January 24, 2022, Lesaka SA, entered into a Fourth Amendment and Restatement Agreement, which includes, among other agreements, an Amended and Restated Common Terms Agreement (“CTA”, a Senior Facility G Agreement and a Senior Facility H Agreement (collectively, the “Loan Documents”) with RMB and 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, and certain other parties. Lesaka agreed to guarantee the obligations of Lesaka SA to the Lenders. The Loan Documents became effective on April 14, 2022. Pursuant to the Senior Facility G Agreement and the Senior Facility H Agreement, Lesaka SA was entitled to borrow up to an aggregate of ZAR 750.0 million, which was subsequently increased to ZAR 768.975 million as discussed below (“Facility G”), and ZAR 350 million (“Facility H”), respectively, for the sole purposes of funding the acquisition of Connect and paying transaction costs

On March 22, 2022, Lesaka SA and RMB, in its capacity as Facility Agent, entered into a letter agreement to amend the CTA and Senior Facility G Agreement (“CTA and Facility G Amendment Letter”). The parties to this letter agreed to (i) increase Facility G from ZAR 750.0 million to ZAR 768.975 million, (ii) insert certain definitions and (iii) amend certain of the discussion trigger events.

On March 22, 2022, Lesaka and RMB, in its capacity as Facility Agent, entered into a letter agreement to amend the CTA and Senior Facility H Agreement (“CTA and Facility H Amendment Letter”). The parties to this letter agreed to amend the CTA to (i) allow for a reduction in the Minimum Group Cash Balances (as defined in the Loan Documents) to ZAR 225.0 million until April 30, 2022, provided this is as a result of certain cash balances currently held as security in favor of Nedbank Limited, (ii) allow for an equivalent reduction in the Minimum Group Cash Balance to below ZAR 300 million, to the extent credit support provided by the VCP Investment Fund and/ or VCP Investment Portfolios (“VCP Investors”) exceeds ZAR 350 million, but such reduction is limited to ZAR 80 million, and (iii) include an undertaking discussion trigger event under which the Facility Agent shall have a right to discuss increasing the value of shares that VCP Investors are obliged to subscribe for to the extent Lesaka SA’s Group Cash Balances fall below ZAR 340 million after April 30, 2022.

The Loan Documents, as amended, become effective upon closing the transaction to acquire Connect.

On September 7, 2022, the parties to the January 2022 Loan Documents entered in a letter agreement to amend the CTA and related Facility G and Facility H agreements to (i) delete the covenant requiring compliance with Minimum Group Cash Balances (as defined in the Loan Documents and (ii) to extend the final maturity dates for Facility G and Facility H to April 30, 2024 .

The Loan Documents contain customary covenants that require Lesaka SA to maintain a specified total asset cover ratio and restrict the ability of Lesaka, Lesaka 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.

Facility G was utilized, in full, on April 14, 2022. Facility G is required to be repaid on April 30, 2024. Interest on Facility G is payable quarterly in arrears based on the 3-month Johannesburg Interbank Agreed Rate (“JIBAR”) in effect from time to time plus an agreed margin. The JIBAR rate was 5.0% on June 30, 2022. Lesaka SA paid a non-refundable deal origination fee of ZAR 11.25 million to the Lenders related to Facility G.

Facility H was utilized, in full, on April 14, 2022. Facility H is required to be repaid on April 30, 2024. Interest on Facility H is payable quarterly in arrears based on JIBAR in effect from time to time plus an agreed margin. Lesaka SA paid a non-refundable deal origination fee of ZAR 5.25 million to the Lenders related to Facility H.

The Facility H Agreement provides the Lenders with a right to discuss the capitalization of the Lesaka group with its management and Value Capital Partners Proprietary Limited (“VCP”) if Lesaka’s market capitalization on the NASDAQ Stock Market (based on the closing price on the NASDAQ Stock Market) on any day falls below the USD equivalent of ZAR 3.250 billion. VCP is required to maintain an asset cover ratio above 5.00:1.00, calculated as the total VCP investment fund net asset value (as defined in the Facility H agreement) divided by the Facility H borrowings outstanding, measured as of March, June, September and December each year (as applicable) (each a “Measurement Date”). The Lenders require Lesaka SA to deliver a compliance certificate procured from VCP as of each applicable Measurement Date, which shows the computation of the asset cover ratio.

12.Borrowings (continued)

South Africa (continued)

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

Repaid and cancelled facilities - Facility A, B, C, D and F

As part of the Original Loan Documents concluded on July 21, 2017, Lesaka SA entered into a Senior Facility A Agreement, Senior Facility B Agreement and Senior Facility C Agreement, pursuant to which, among other things, Lesaka SA borrowed 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, Lesaka SA further amended the July 2017 Facilities agreement, which included adding the Debt Guarantor. The covenants were also amended and now include customary covenants that require Lesaka SA to maintain a specified total asset cover ratio and restrict the ability of Lesaka 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. Lesaka 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. Lesaka SA also entered into a pledge and cession agreement with the Debt Guarantor pursuant to which, among other things, Lesaka 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.

On September 4, 2019, Lesaka 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. Lesaka 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. Lesaka 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.

Lesaka 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.

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

The Company, through CCMS, entered into a Facilities Agreement (the “CCMS Facilities Agreement”) with RMB in January 2022. The CCMS Facilities Agreement was further amended through letter agreements, which form part of the CCMS Facilities Agreement, in March and April 2022, respectively, and the disclosure in this note includes the amended terms. The CCMS Facilities Agreement became effective upon closing the Connect transaction.

The Connect facilities include (i) an overdraft facility (general banking facility) of ZAR 248.0 million; (ii) Facility A of ZAR 700.0 million (a long-term facility with a bullet repayment); (iii) Facility B of ZAR 350.0 million (a long-term facility with amortizing repayments commencing September 2022); and (iv) an asset-backed facility of ZAR 70.7 million. The amount available under the general banking facility will reduce to ZAR 205.0 million in mid-November 2022. CCMS paid a non-refundable structuring fee of approximately ZAR 5.5 million. Interest on Facility A and Facility B is payable quarterly in arrears based on JIBAR in effect from time to time plus a margin. Interest on the asset-backed facility is payable quarterly in arrears based on prime in effect from time to time plus a margin.

Borrowings under the CCMS Facilities Agreement are secured by a pledge by CCMS of, among other things, all of its equity shares, its entire equity interests in equity securities it owns and any claims outstanding. The CCMS Facilities Agreement contains customary covenants that require CCMS to maintain specified debt service, interest cover and leverage ratios.

12.Borrowings (continued)

South Africa (continued

K2020 facility, comprising long-term borrowings

The Company, through its wholly owned subsidiary, K2020, entered into a Revolving Credit Facility Agreement (the “Revolving Facility Agreement”) with RMB on February 15, 2021. The revolving credit facility is for an amount of ZAR 150.0 million and matured on August 12, 2022. The facility continues to operate normally in agreement with K2020’s lender, while the parties conclude the legal agreements to significantly increase and extend the facility. Interest on the revolving credit facility is payable quarterly in arrears based on prime in effect from time to time plus a margin. A commitment fee of 1.5% per annum is charged on the undrawn available facility amount.

Certain merchant finance loans receivable have been pledged as security for the revolving credit facility obtained from RMB. CCMS also provided RMB with an unsecured limited guarantee (“the guarantee”) in respect of the revolving credit facility entered into between K2020 and RMB. The guarantee is limited to a maximum aggregate amount of ZAR 10.0 million and will become due and payable should there be any default on any of K2020’s payment obligations to RMB.

RMB facility, comprising indirect facilities

As of June 30, 2022, the aggregate amount of the Company’s short-term South African indirect credit facility with RMB was ZAR 135.0 million ($8.3 million), which includes guarantees, letters of credit and forward exchange contracts. As of June 30, 2022, the Company had utilized approximately ZAR 5.1 million ($0.3 million) of its indirect and derivative facilities of ZAR 135.0 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 22).

Nedbank facility, comprising short-term facilities

As of June 30, 2022, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited was ZAR 156.6 million ($9.6 million). The credit facility represents an indirect and derivative facilities of up to ZAR 156.6 million ($9.6 million), which include guarantees, letters of credit and forward exchange contracts.

On November 2, 2020, the Company amended its short-term South African credit facility with Nedbank Limited to increase the indirect and derivative facilities component of the facility from ZAR 150.0 million to ZAR 159.0 million. On June 1, 2021, the Company further amended its short-term South African credit facility with Nedbank Limited to reduce the indirect and derivative facilities component of the facility from ZAR 159.0 million to ZAR 157.0 million, and to cancel its ZAR 50 million general banking facility. During the year ended June 30, 2022, the Company cancelled its overdraft facility of up to ZAR 250.0 million ($15.0 million), which was used to fund mobile ATMs as it no longer operates a mobile ATM service.

The Company has entered into cession and pledge agreements with Nedbank related to certain of its Nedbank credit facilities (the general banking facility and a portion of the indirect facility) and the Company has ceded and pledged certain bank accounts to Nedbank and also provided a cession of Lesaka SA’s shareholding in Cell C. The funds included in these bank accounts are restricted as they may not be withdrawn without the express permission of Nedbank. These funds, of ZAR 155.1 million ($9.5 million translated at exchange rates applicable as of June 30, 2022), are included within the caption restricted cash related to ATM funding and credit facilities on the Company’s consolidated balance sheet as of June 30, 2022.

The short-term facility provided 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, 2022, these facilities were no longer available. The Company had total funds of $0.2 million in bank accounts with Nedbank which have been set off against $0.2 million drawn under the Nedbank facility, for a net amount drawn under the facility of $0 (nil) as of June 30, 2021.

As of June 30, 2021, the Company had not utilized its ZAR 250.0 million overdraft facility to fund ATMs. As of June 30, 2022 and June 30, 2021, the Company had utilized approximately ZAR 92.1 million ($5.7 million) and ZAR 156.6 million ($10.9 million), respectively, of its indirect and derivative facilities of ZAR 156.6 million (2021: ZAR 156.6 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 22).

On June 30, 2022, the Company’s ZAR 60.0 million bank guarantee issued by Nedbank to a third party expired and on July 1, 2022, it was replaced with a ZAR 28.0 million bank guarantee issued by RMB to the same third party. In July 2022, the Company was able to release ZAR 60.0 million in cash held in a pledged bank account with Nedbank which was held as security against the bank guarantee issued by Nedbank, and the ZAR 28.0 million bank guarantee did not require a cash underpin.

12.Borrowings (continued)

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. 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, 2022, and the movement in the Company’s short-term facilities from as of June 30, 2021 to as of June 30, 2022:

					RMB		RMB		RMB		Nedbank
					Facility E		Indirect		Connect		Facilities		Total
Short-term facilities available as of June 30, 2022					$	85,941	$	8,287	$	15,221	$	9,610	$	119,059
	Overdraft					-		-		15,221		-		15,221
	Overdraft restricted as to use for ATM funding only					85,941		-		-		-		85,941
	Indirect and derivative facilities					-		8,287		-		9,610		17,897
Movement in utilized overdraft facilities:
	Balance as of June 30, 2020					14,756		-		-		58		14,814
	Utilized					340,655		-		-		19,428		360,083
	Repaid					(346,187)		-		-		(19,253)		(365,440)
	Foreign currency adjustment(1)					5,021		-		-		(233)		4,788
		Balance as of June 30, 2021(2)				14,245		-		-		-		14,245
			Restricted as to use for ATM funding only			14,245		-		-		-		14,245
			No restrictions as to use			-		-		-		-		-
				Facilities acquired in transaction		-		-		16,903		-		16,903
				Utilized		563,588		-		5,929		1,345		570,862
				Repaid		(517,948)		-		(6,189)		(1,322)		(525,459)
				Foreign currency adjustment(1)		(8,547)		-		(1,763)		(23)		(10,333)
	Balance as of June 30, 2022					51,338		-		14,880		-		66,218
			Restricted as to use for ATM funding only			51,338		-		-		-		51,338
			No restrictions as to use			-		-		14,880		-		14,880
	Interest rate as of June 30, 2022 (%)(3)					8.2500				8.2500		-
Movement in utilized indirect and derivative facilities:
	Balance as of June 30, 2020					-		-		-		5,398		5,398
		Utilized				-		-		-		4,009		4,009
		Foreign currency adjustment(1)				-		-		-		1,540		1,540
	Balance as of June 30, 2021					-		-		-		10,947		10,947
		Guarantees cancelled				-		-		-		(4,240)		(4,240)
		Utilized				-		336		-		-		336
		Foreign currency adjustment(1)				-		(23)		-		(1,053)		(1,076)
	Balance as of June 30, 2022				$	-	$	313	$	-	$	5,654	$	5,967

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

(2) As of June 30, 2021, there was $0.2 million offset against the Nedbank overdraft facilities.

(3) Facility E and Connect facility interest set at prime, Nedbank interest rate set at prime less 1.15%.

12.Borrowings (continued)

Movement in long-term borrowings

The Company had no long-term borrowings as of June 30, 2021. Summarized below is the movement in the Company’s long-term borrowing from as of June 30, 2021, to as of June 30, 2022:

				Facilities
				G & H		A&B		K2020		Asset backed		Total
Included in current				$	-	$	-	$	-	$	-	$	-
Included in long-term					-		-		-		-		-
Opening balance as of June 30, 2021					-		-		-		-		-
	Facilities utilized				77,069		-		472		1,310		78,851
	Facilities acquired in transaction				-		72,318		9,772		4,870		86,960
	Facilities repaid				(4,492)		-		(933)		(156)		(5,581)
	Non-refundable fees paid				(1,307)		-		-		-		(1,307)
	Non-refundable fees amortized				196		18		37		-		251
	Foreign currency adjustment(1)				(8,112)		(7,864)		(1,002)		(550)		(17,528)
		Closing balance as of June 30, 2022			63,354		64,472		8,346		5,474		141,646
		Included in current			-		4,604		-		2,200		6,804
		Included in long-term			63,354		59,868		8,346		3,274		134,842
			Unamortized fees		(976)		(322)		35		-		(1,263)
			Due within 2 years		64,330		4,603		8,311		2,338		79,582
			Due within 3 years		-		6,139		-		907		7,046
			Due within 4 years		-		9,975		-		29		10,004
			Due within 5 years	$	-	$	39,473	$	-	$	-	$	39,473
Interest rates as of June 30, 2022 (%):					7.0 - 8.0		8.75		8.75		9.00
	Base rate (%)				5.00		5.00		5.00		8.25
	Margin (%)				Varies		3.75		1.25		0.75
Footnote number					(2)(3)		(4)		(5)		(6)

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

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

(5) Interest is charged at prime plus 1.25% per annum on the utilized balance.

(6) Interest is charged at prime plus 1.00% 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 consolidated statement of operations during the years ended June 30, 2022 and 2020, was $2.3 million and $0.6 million, respectively. The was no interest expense incurred during the year ended June 30, 2021. Prepaid facility fees amortized included in interest expense during the year ended June 30, 2022, was $0.2 million. There was no prepaid facility fee amortization during the years ended June 30, 2021 and 2020, respectively. Interest expense incurred under the Company’s K2020 facility relates to borrowings utilized to fund a portion of the Company’s merchant finance loans receivable and interest expense of $0.2 million is included in the caption cost of goods sold, IT processing, servicing and support on the consolidated statement of operations for the year ended June 30, 2022.