3. NON-FINANCIAL INSTRUMENTS
3.2 Liquidity risk
 

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due, both under normal and stressed circumstances.

The Group's objective is to maintain prudent liquidity risk management by maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping committed credit lines available. Cash flow forecasting is performed in the operating entities of the Group to ensure sufficient cash to meet operational needs, while maintaining sufficient headroom to ensure that borrowing limits (where applicable) are not breached.

Surplus cash held by the operating entities over and above the balance required for working capital management is transferred to Group treasury. Group treasury invests surplus cash in interest-bearing accounts, identifying instruments with sufficient liquidity to provide adequate headroom as determined by the above mentioned forecasts.

Maturity of financial liabilities

The table below analyses the undiscounted cash flows for the Group's non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date.

Notes   Less than
one month
or on
demand
R’000
 
  More than
one month
but not
exceeding
one year
R’000
  Payable in:
More than
one year
but not
exceeding
two years
R’000
  More than
two years
but not
exceeding
five years
R’000
  More than
five years
R’000
 
2020
Interest-bearing borrowings 3.6.2   5 005   2 320 703   2 778      
Non-interest-bearing
borrowings
3.6.2     13 952        
Trade and other payables 3.6.1   2 598 265   1 955 394        
Lease liabilities 3.8   2 999   66 909   41 513   48 834    
Derivative liability 3.7     214 559        
Financial liability at fair value
through profit or loss
3.7   357 562          
Financial guarantee
contracts
3.6.3   87 603   113 871        
Bank overdraft 3.5.4   192          
Total     3 051 626   4 685 388   44 291   48 834    
2019                        
Interest-bearing borrowings 3.6.2   18 553   1 706 571   1 722 693   2 877    
Non-interest-bearing
borrowings
3.6.2     21 924   13 952      
Trade and other payables 3.6.1   3 354 792   1 860 145     17 304    
Put option liability 3.7     158 638        
Financial liability at fair value
through profit or loss
3.7     301 716        
Financial guarantee
contracts
3.6.3   243 492   12 500 001        
Contingent consideration 3.6.1   1 923          
Bank overdraft 3.5.4   7 843          
Total     3 626 603   5 298 994   1 736 645   20 181    
Trade and other payables exclude non-financial instruments, being VAT and certain amounts included within accruals and sundry creditors.

Liquidity support

As part of the restructure of the debt into Cell C by third-party lenders, The Prepaid Company was required to provide liquidity support to Magnolia Cellular Investment 2 (RF) Proprietary Limited (SPV2), which is 100% held by 3C Telecommunications Proprietary Limited, of up to USD80 million, which liquidity support was to be provided over 24 months in the form of subordinated funding to SPV2. Oger Telecoms contributed USD36 million of the aforesaid USD80 million, thus reducing The Prepaid Company's obligation in this regard to a maximum of USD44 million. As at 31 May 2020, the Group has contributed USD24 million to SPV2. The remaining amount due of USD20 million is included in financial liabilities at fair value through profit or loss.

Group facilities

The Group has access to the following facilities in order to meet its liquidity needs:

Facility Borrower Investec  Rand
Merchant
Bank
  Value
R’000
  Interest
rate
Interest
period
Repayment    
date    
 
Senior facility A Comm Equipment
Company
Proprietary Limited
50% 50% 266 677 3-month
JIBAR
plus 3.85%
Quarterly 31 August    
2020*  
Senior facility B Comm Equipment
Company
Proprietary Limited
50% 50%   200 000   Prime
plus 0.35%
Monthly 31 August    
2020*  
 
Mezzanine facility Comm Equipment
Company
Proprietary Limited
100%   410 532   Prime
plus 1.5%
Monthly 31 August    
2020*  
 
Facility A The Prepaid
Company
Proprietary Limited
100%   1 500 000   Prime Monthly 31 March    
2021**
 
Facility B The Prepaid
Company
Proprietary Limited
100%   307 000   Prime Monthly 31 August    
2020    
 
          2 684 209          
* Subsequent to year-end, the Group has renewed these facilities until 31 August 2021. Refer to note 9.1.
** Subsequent to year-end, the Group has renewed this facility until 30 September 2021. Refer to note 9.1.
  • The working capital loan facilities available to The Prepaid Company at year-end amounted to R1.8 billion (2019: R2.050 billion), of which R1.586 billion (2019: R1.512 billion) had been utilised. Refer to note 3.6.2.
  • The following debt covenants applied to the TPC facilities with Investec:
    • debt to EBITDA ratio must be less than 2.5 times;
    • the sum of 70% of debtors and 80% of stock must exceed the utilised value of the facility;
    • 90% of the cash deposits are to be held with Investec (on average for the month);
    • debt to EBITDA ratio must be less than 2.5 times; and
    • BLT's market capitalisation must exceed R2 billion.

The Group has not been in breach in respect of these covenants.

The Group has pledged certain securities in respect of this facility. Refer to notes 3.5.2 and 4.4.

  • Comm Equipment Company Proprietary Limited (CEC) has a financing facility with Rand Merchant Bank Limited and Investec Bank of R877.2 million (2019: R1.92 billion). This facility is restricted for use by CEC. The utilised portion of the facility at year-end amounted to R716.3 million (2019: R1.669 billion). Refer to note 3.6.2.
  • The following debt covenants applied to the CEC facilities with Investec and Rand Merchant Bank:
    • EBITDA to total finance costs ratio must be greater than 2.5 times;
    • total of Cell C Group liabilities and subscriber receivables amount to debt ratio must be greater than 1.5; and
    • adjusted subscriber receivable to the difference between relevant debt and CEC treasury account balance ratio must be greater than 1.25.

The Group has not been in breach in respect of these covenants.

  • The Group has renewed senior facility A, senior facility B, the mezzanine facility and facility A.

Pledges, guarantees and sureties

  • The shares in CEC have been pledged as security for the R877.2 million Rand Merchant Bank Limited and Investec Bank facilities. Blue Label Telecoms and The Prepaid Company have issued guarantees to the value of R150 million for this facility.
  • The Group has overdraft, credit card and debit order collection facilities with FNB, a division of First National Bank Limited (FNB). These facilities have been secured through Group cross-sureties issued by the Company and certain subsidiary companies. These facilities, which remain unchanged from the prior year, comprised an overdraft facility of R19.85 million, credit card facility of R1.3 million and a debit order settlement facility of R13.5 million. At 31 May 2020, the overdraft facility was unutilised.
  • Guarantees to the value of R1.6 billion (2019: R936.8 million) are issued by the Group's bankers in favour of suppliers on behalf of the Group. The Group does not have access to this portion of its facilities while amounts owing to suppliers are outstanding.