Update on MyBucks legal changes, 30 April 2020

06.05.2020

mintosblog

Since the last update, some of the MyBucks Group entities were not able to make timely repayments to Mintos investors. Mintos, together with MyBucks Group management, has agreed on several steps to remedy the situation and protect investor interests: 

1. While the first part of the restructuring of MyBucks Group was already completed earlier this year, it resulted in separating the Kenya and South Africa entities from the MyBucks Group. They are now part of Finclusion Group, which also includes non-banking entities in Namibia, Swaziland, and Tanzania. These entities are making their payments on time and are not distressed. Finclusion Group has approximately € 6 million of equity, net loan book of approximately € 14 million and assets of € 18.6 million. A separate guarantee agreement will be signed with Finclusion Group, covering the financial obligations of the Kenyan and South African entities. This way, the performance of these lending companies will not be impacted by the distressed entities and the guarantee structure will reflect the actual structure of MyBucks Group and Finclusion Group. Furthermore, there will be separate reporting provided by both groups to Mintos.

2. As the Botswana and Zambia entities are not able to fulfill their buyback obligations, we have agreed with MyBucks Group that it will cover all outstanding payments from the distressed entities with two payments – € 1 million till 30 September and € 3 million till 31 December, 2020. The payments will be made from envisioned sell-downs by MyBucks of stakes in selected subsidiaries and capital raising efforts. Further detail to be released when known. Meanwhile, Botswana and Zambia loans are being suspended on the Primary and Secondary markets on Mintos.

3. In order to secure investor interests in case the asset sale is delayed, Mintos has asked for additional security from MyBucks Group, and a security pledge on € 5.85 million of MyBucks Botswana portfolio will be registered. 

4. The Mintos Rating has been changed to C- for MyBucks Group. Finclusion Group has an assigned rating of B-.

What this means for Mintos investors

For investors who have invested in GetBucks South Africa and GetBucks Kenya loans, the guarantor will be changed to Finclusion Group and these entities will be listed on Mintos as Finclusion Group to avoid confusion.

For investors who have invested in Botswana loans, the regular repayments will be settled till 30 April and will be made according to the schedule. For those loans that have entered into buyback or repurchased due to agreement change or will enter into buyback or will be repurchased due to agreement change till the end of 2020, the repayments and interest will be covered in two parts: a first payment till 30 September, and a second till 31 December, 2020.

For investors who have invested in Zambia loans, both regular repayments and buybacks will be covered in two payments: first till 30 September and second till 31 December, 2020.

Detailed statement by MyBucks entities in Botswana and Zambia

Botswana

In March 2019, the Board of MyBucks S.A. had to make substantial changes to the Group following a significant financial deterioration, leaving the Group on the verge of bankruptcy with corresponding losses for investors. Significant measures were implemented subsequently as explained on the Mintos blog. Following these measures, the balance sheet of the Group returned to positive equity. The company then raised more capital to strengthen all the subsidiaries. GetBucks Botswana remained significantly cash flow constrained, particularly due to its guaranteeing of the Zambian entity’s payments (which has unfortunately not been able to make independent payments for over a year). GetBucks Botswana, however, has restored its balance sheet to financial health, and now only suffers from a liquidity mismatch resulting from long-term assets with short-term funding. In order to address this, the Group had agreed to launch a cashback campaign for all loans longer than two years to drive liquidity on long-term loans and correct this liquidity mismatch. The Group planned to place approximately € 2-3 million in long-term loans, to permanently address this mismatch. Unfortunately, this strategy did not materialize, as liquidity has dried up following Covid-19. Moreover, as a result of the recent developments in the world pertaining to Covid-19, the company is facing the following three complications:

1. Botswana is now on lock-down, potentially leading to slightly reduced short-term collections as people are not leaving their houses, working part-time.

2. As a result of (1), the company has also had substantially more roll-overs and loan restructurings than expected which will be seen as a settlement (repurchase) on Mintos.

3. Dry-down of local liquidity and delay in local capital raising for the timing to be determined due to difficulties in attracting funding from other sources.

4. Global dry-down of liquidity and the ability to solicit investors limit the Group’s ability to continue its capital raising discussions until this situation has corrected itself.

Had the Botswana entity not supported the Zambia entity with approximately € 2 million over the past twelve months, it would likely still be in a position in which it would continue to be able to cover its burden as these funds would’ve been deployed in a short-term cash generating loan book. For the time being, the company aims to make payments from Botswana but expects delays to continue until this situation resolves itself.

Zambia

In March 2019, the Board of MyBucks S.A. had to make substantial changes to the Group following a significant financial deterioration, leaving the Group on the verge of bankruptcy with corresponding losses for investors. Significant measures were implemented subsequently as explained on Mintos here. Following these measures, the balance sheet of the Group was returned to positive equity, but the Zambian entity was left in particularly poor shape as the previous management had borrowed from the Zambian entity and used these funds to pay group expenses and investor costs. In addition, payments from Zambian government on the payroll deduction collections have been substantially impaired and the exchange rate deteriorated substantially, meaning that in local currency for every euro borrowed on Mintos (which was effectively given to Group and spent on overheads) now an additional 45% in currency exchange losses need to be covered. As a result, Zambia has not been independently able to make any payments but has been supported by Botswana over the past few months – with a view of refinancing this from the Group capital raising or asset disposal exercises. These are delayed and to Covid-19 related impacts, meaning that the timing of settlements for Zambia is uncertain. The company believes that it will be able to settle the overdue amounts from asset disposals by 30 September 2020 – and subsequently, restore the Zambian balance sheet to ensure regular payments throughout 2021.

Final words

Timothy Nuy, CEO of GetBucks: ”This situation is of course extremely unfortunate, but nobody could have foreseen the implications of Covid-19. We were confident that capital raising would be successfully concluded in Q2 of 2020, which would have completed the second phase of the restructuring successfully. 

We remain confident that we will be able to do this, to ensure all investors are repaid – however, its timing is delayed. We will continue to communicate transparently to all investors and ask for your understanding in these difficult times. We are working hard to achieve the best outcome for all our stakeholders from clients, to employees, depositors, lenders and shareholders. Together, we believe we can get through this and achieve a positive outcome for all involved parties.”

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