Highveld Detailing Business Plan — Debt Serviceability
Debt service across the projection and the cover position through the loss-making years.
Section 29 of 38
Debt Serviceability
Jump to section
- 0. Basis of Preparation and Important Notice
- 1. Executive Summary
- 2. Investment Thesis
- 3. What Must Be True, and What Would Break the Thesis
- 4. Company, Structure and Governance
- 5. The Customer Problem and the Value Proposition
- 6. Service Portfolio, Pricing and Contribution
- 7. Industry Structure and Profitability
- 8. Market Sizing and the Addressable Opportunity
- 9. Customer Segments and Buying Behaviour
- 10. Competitive Landscape
- 11. Business Model and Revenue Architecture
- 12. Channel Economics: Where the Capital Should Go
- 13. Go-to-Market Strategy
- 14. Operating Model
- 15. People and Organisation
- 16. Strategic Plan
- 17. SWOT and Strategic Implications
- 18. Risk Analysis
- 19. ESG, Transformation and Development Impact
- 20. Implementation Roadmap
- 21. Financial Assumptions
- 22. Cost Structure and Operating Leverage
- 23. Projected Income Statement
- 24. Projected Balance Sheet
- 25. Projected Cash Flow
- 26. Capital Expenditure
- 27. Funding Requirement and Structure
- 28. Debt Serviceability
- 29. Break-even Analysis
- 30. Valuation and Investor Returns
- 31. Sensitivity and Scenario Analysis
- 32. Key Performance Indicators and Management Dashboard
- 33. Exit Strategy
- 34. Conclusion and Recommendation
- A. Appendix A: Detailed Assumptions Register
- B. Appendix B: Roll-out Schedule
- C. Appendix C: Model Integrity Verification
Base-case debt service cover in FY2030 is 1.03x. A conventional term facility requires 1.25 times. The plan does not conceal this by re-profiling the debt; it proposes a stepped covenant and asks the lender to price the year-three tightness explicitly.
Table 52. Debt service and covenant metrics
|
FY2028 |
FY2029 |
FY2030 |
FY2031 |
FY2032 |
|
|---|---|---|---|---|---|
|
Term loan balance, closing |
5.09 |
9.00 |
9.00 |
6.75 |
4.50 |
|
Asset finance balance, closing |
1.30 |
3.26 |
2.48 |
1.36 |
0.44 |
|
Revolving facility drawn, closing |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
|
Total debt |
6.39 |
12.26 |
11.48 |
8.11 |
4.94 |
|
Less: cash |
-6.80 |
-9.56 |
-4.58 |
-2.35 |
-3.87 |
|
Net debt |
-0.40 |
2.70 |
6.90 |
5.76 |
1.07 |
|
EBITDA |
-4.41 |
-1.28 |
2.53 |
6.98 |
10.15 |
|
Capital repayments |
0.20 |
0.70 |
1.12 |
3.38 |
3.17 |
|
Interest paid |
0.82 |
0.97 |
1.35 |
1.11 |
0.74 |
|
Debt service cover ratio |
n/a |
n/a |
1.03x |
1.54x |
2.53x |
|
Net debt / EBITDA |
n/m |
n/m |
2.73x |
0.83x |
0.11x |
|
Interest cover |
n/m |
n/m |
1.87x |
6.30x |
13.72x |
|
Gearing (net debt / net debt + equity) |
41% |
46% |
48% |
37% |
22% |
Debt service cover is not meaningful in FY2028 and FY2029 because the term loan is within its 36-month capital moratorium and EBITDA is negative. The first year in which the ratio carries information is FY2030.
The covenant proposal
Highveld proposes that the term facility be documented without a debt service cover test in FY2028, FY2029 or FY2030, with the first test at FY2031 set at 1.15 times, stepping to 1.25 times from FY2032. This is deliberately more transparent than the alternative, which would be to re-profile the amortisation so that the ratio appears to pass.
Table 53. Proposed covenant package
|
Covenant |
First test |
Level |
Rationale |
|
|---|---|---|---|---|
|
Debt service cover |
FY2031 |
1.15x stepping to 1.25x from FY2032 |
Base case delivers 1.54x in FY2031 and 2.53x in FY2032, giving reasonable but not generous headroom |
|
|
Net debt to EBITDA |
FY2031 |
3.00x falling to 2.00x from FY2032 |
Base case delivers 0.83x and 0.11x — comfortable, because the business deleverages quickly once EBITDA turns |
|
|
Minimum liquidity |
Monthly from close |
R1.5m |
Tested on cash plus undrawn revolver; the binding constraint in FY2031 |
|
|
Capital expenditure limit |
Annually |
Approved budget plus 10% |
Prevents unbudgeted expansion from consuming debt service capacity |
|
|
Distribution block |
Continuous |
No distributions until DSCR above 1.50x for two consecutive years |
Academic on these projections — no distribution is possible before FY2034 in any event |
|
|
What a lender should take from this section The FY2030 cover of 1.03x means the business generates almost exactly enough cash to meet its obligations in that year and no more. There is no cushion. A ten per cent throughput shortfall in FY2030 would produce a default on a conventionally documented facility. The mitigants are real: the moratorium delays amortisation until the business has scale, the revolver provides liquidity independent of the term facility, and the asset finance is secured on realisable equipment. But a lender underwriting this facility is underwriting a year-three execution risk, and should price it as such rather than relying on the covenant package to catch a problem after the fact. |
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