Tarlton Beetroot Business Plan — Debt Serviceability
Debt service across the projection, peak net debt of R13.21m and the cover position through the ramp.
Section 29 of 37
Debt Serviceability
Jump to section
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. Investment Thesis
- 3. Company, Structure and Stage of Development
- 4. Customer Problem, Value Proposition and Monetisation
- 5. Products, Portfolio and Unit Economics
- 6. Industry Analysis
- 7. Market Analysis and Sizing
- 8. Customer and Channel Analysis
- 9. Competitive Landscape
- 10. Business Model
- 11. Go-to-Market Strategy
- 12. Operating Model: Agronomy and Production
- 13. Operating Model: Post-Harvest, Packhouse and Logistics
- 14. Water, Energy and Land: The Three Binding Constraints
- 15. Management and Organisation
- 16. Strategic Plan
- 17. SWOT Analysis
- 18. Risk Analysis and Register
- 19. ESG and Development Impact
- 20. Implementation Roadmap
- 21. Financial Assumptions
- 22. Projected Income Statement
- 23. Projected Balance Sheet
- 24. Projected Cash Flow
- 25. Capital Expenditure and Working Capital
- 26. Funding Requirement and Structure
- 27. Break-even Analysis
- 28. Debt Serviceability
- 29. Investment Returns and Valuation
- 30. Sensitivity and Scenario Analysis
- 31. Phase 3: Processing Optionality
- 32. Key Performance Indicators and Management Dashboard
- 33. Conclusion and Investment Recommendation
- A. Appendix A: Monthly Projections, Year 1
- B. Appendix B: Detailed Assumptions Register
- C. Appendix C: Glossary
Debt service is not covered until Year 4, and the mortgage bond structure is what makes the intervening period survivable.
Table 48 Debt service and coverage measures
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
EBITDA (R’000) |
(1 466) |
(1 623) |
(2 179) |
2 807 |
5 792 |
|
Interest paid (R’000) |
77 |
64 |
816 |
1 236 |
1 098 |
|
Principal repaid (R’000) |
99 |
113 |
404 |
999 |
1 178 |
|
Total debt service (R’000) |
176 |
176 |
1 220 |
2 235 |
2 276 |
|
DSCR |
(8.31) |
(9.20) |
(1.79) |
1.26 |
2.54 |
|
Interest cover |
(22.78) |
(16.14) |
(3.70) |
0.23 |
2.07 |
|
Net debt (R’000) |
(116) |
1 649 |
12 659 |
13 213 |
9 533 |
|
Net debt to EBITDA |
n.m. |
n.m. |
n.m. |
4.7x |
1.6x |
A DSCR covenant of 1.20 times, tested quarterly from month 42, is proposed. On base case the covenant is met with limited headroom in Year 4 at 1.26 times and comfortably in Year 5 at 2.54 times. On the downside case it is breached.
Table 49 Debt instruments and repayment profile
|
Instrument |
Principal |
Rate |
Term |
Security and structure |
|---|---|---|---|---|
|
Mortgage bond |
R5.94m |
prime + 1.50% |
180 months |
First-ranking over the 85 ha property; 12 months interest-only from month 27, which is what carries the business through the pre-EBITDA period |
|
Asset finance, Tranche A |
R0.65m |
prime + 2.25% |
60 months |
Instalment sale over the tractor and light delivery vehicle |
|
Asset finance, Tranche B |
R4.50m |
prime + 2.25% |
60 months |
Instalment sale over tractors, refrigerated truck and packhouse line |
|
Overdraft |
As drawn |
prime + 4.00% |
Revolving |
Currently unsecured and unarranged; this is the facility that must be replaced by the committed R7.5 million line |
|
Assessment |
Projected cash flows support the proposed term debt structure from Year 4 onward, but not before. The structure works only because the bond carries 12 months of interest-only and because principal amortisation is spread over 180 months. A lender should note that debt service is being funded from equity, not operations, until month 40, and should size the facility accordingly. |
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