Vodacom said a Kenyan court ruling against part of its Safaricom deal caused defaults on some of its loans. The group had to ask its lenders for waivers.
The company shared the details in its interim results for the six months to 30 September. The results were published on Tuesday, TechCentral reported.
Kenya’s high court cancelled the government’s sale of a 15% stake in Safaricom on 15 September. The shares had been sold to Vodafone Kenya, a Vodacom subsidiary. The ruling came about two and a half months after the deal closed.
Vodacom said the judgment “gave rise to certain events of default and cross-default under specified group funding arrangements”.
Some lenders promised in writing that they would not demand early repayment because of the ruling. But some of these promises did not give Vodacom a firm right to delay payment for at least 12 months.
Because of this, Vodacom had to move R2.3-billion of borrowings from long-term debt to short-term debt. This change was shown at 30 September.
One default was on a loan from Stanbic Bank Kenya. That loan was linked to the R5.1-billion Vodacom paid the Kenyan government for a share of future Safaricom dividends.
To fix that default, Vodacom signed a standstill agreement. It agreed not to take money out of a special account. This left R1.2-billion in dividends locked up at the end of the period.
Vodacom said that after the period ended, it got waivers from the lenders involved. The waivers cover all defaults that came only from the court judgment.
The Safaricom deal has changed Vodacom’s finances in a big way. Its net debt rose by R78.8-billion compared with a year earlier, reaching R135.6-billion.
Vodacom paid for the purchase with R35-billion of debt. Of that amount, R9-billion was in preference shares. The group also took on R18.1-billion of Safaricom’s own net debt.
Its ratio of net debt to earnings before interest, tax, depreciation and amortisation rose to 1.6 times. A year earlier it was 0.9 times. Counting a full year of Safaricom earnings, the ratio was 1.3 times.
Vodacom has counted Safaricom as a subsidiary since 30 June. It booked a once-off accounting gain of R23.1-billion when it revalued its earlier stake.
If the high court ruling stands, Vodacom’s stake in Safaricom would drop from 55% to about 40%. TechCentral reported in October that this would cost Vodacom control of the company.
“Our confidence in the strategic rationale of the transaction remains unchanged,” Vodacom CEO Shameel Joosub said.
The Kenyan government, Vodafone Group and Vodafone Kenya have all appealed the ruling. The people who brought the case have also appealed parts of the judgment.
On 13 October, the court of appeal ordered that things stay as they are for now. Vodafone Kenya remains the registered holder of the shares. The court also said the appeal should be heard quickly.
Vodacom said it expects a hearing date to be set before the end of December.
Source: this article is based on reporting by TechCentral. Image: TechCentral. Written with the help of AI and published by the Tzaneen Voice Technology desk. See our Editorial Standards.
Werner Jacobs covers technology for Tzaneen Voice. Werner reports on mobile networks, data prices, internet access, smartphones, apps, AI, cybersecurity and South African tech companies. Each story explains what a new product, price change or policy means for ordinary users in South Africa.