Lichtenburg Nut Company Business Plan — Debt Serviceability

Debt service across the projection and the cover position through five loss-making years.

Section 29 of 37

Debt Serviceability

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Figure 1. Cover clears the 1.20x covenant in every year of amortisation, but only just

Table 62. Debt service capacity, FY2032 to FY2038

R million unless stated	FY2032	FY2033	FY2034	FY2035	FY2036	FY2037	FY2038
EBITDA	20.3	25.3	28.4	31.0	34.6	39.1	43.0
Less taxation paid	(0.0)	(0.6)	(0.0)	(0.7)	(0.9)	(1.3)	(2.0)
Less working capital movement	(6.6)	(5.5)	(4.3)	(4.8)	(5.3)	(5.5)	(0.8)
Cash available for debt service	13.7	19.3	24.1	25.5	28.3	32.3	40.3

Principal repayments	1.0	6.2	5.5	10.1	10.5	10.5	10.5
Interest	9.4	8.8	10.0	9.7	8.1	6.1	4.0
Total debt service	10.4	15.0	15.5	19.8	18.6	16.6	14.5

Debt service cover ratio	1.32x	1.28x	1.55x	1.29x	1.52x	1.94x	2.79x
Interest cover	2.16x	2.89x	2.83x	3.21x	4.27x	6.36x	10.84x
Net debt to EBITDA	2.94x	2.00x	2.45x	1.87x	1.26x	0.64x	-0.05x

The capital moratorium runs to month 60, so principal repayment begins in FY2033 (Operating Year 5). FY2032 carries interest only. Operating Years 5 and 7 are the two tightest points, at 1.28x and 1.29x respectively.

28.1 Covenant package and headroom

Table 63. Proposed covenant package and base case headroom

Covenant	Proposed level	First test	Base case at the tightest point	Headroom
Debt service cover ratio	Not less than 1.20x	FY2033	1.28x in FY2033	0.08x
Net debt to EBITDA	Not more than 3.50x	FY2032	2.94x in FY2032	1.29x
Interest cover	Not less than 2.00x	FY2032	2.16x in FY2032	0.16x
Gearing	Not more than 65%	FY2029	56.7% in FY2029	8.3 points
Minimum cash	Not less than R5.0 million	FY2029	R5.0m	At the limit

The covenant package is the most fragile part of the structure

Debt service cover is 1.28x in FY2033, the first amortising year, and 1.29x in FY2035, against a proposed 1.20x covenant. The switching analysis shows that a volume shortfall of 0.6%, a groundnut cost increase of 0.4% or a price decline of 0.2% would put the company below a 1.25x threshold. In practice the base case has almost no covenant headroom in the first two years of amortisation.

Three structural responses are available and should be negotiated before close: a longer amortisation profile (120 months rather than 96, modelled in Section 28.2 below); a cash sweep in place of a fixed amortisation schedule; or an equity cure right permitting shareholders to inject funds to remedy a breach. The plan as presented assumes none of these, so the figures shown are the unmitigated position.

28.2 The optimised structure, modelled

Section 28.1 recommends lengthening the senior amortisation profile and enlarging the revolving facility. Because that recommendation carries a specific numerical claim, it has been run through the model rather than estimated. The variant extends senior amortisation from 96 to 120 months, extends the expansion tranche from 72 to 84 months, and raises the revolving facility from R40 million to R50 million. No operating assumption is changed.

Table 64. Debt service cover under the proposed and optimised structures

Measure	FY2033	FY2034	FY2035	FY2036	FY2037	FY2038
Debt service cover — as proposed	1.28x	1.55x	1.29x	1.52x	1.94x	2.79x
Debt service cover — optimised	1.39x	1.67x	1.42x	1.69x	2.16x	3.06x

Improvement	+0.10x	+0.12x	+0.13x	+0.17x	+0.22x	+0.27x

Table 65. Effect of the optimised structure

Measure	As proposed	Optimised	Change
Minimum debt service cover after moratorium	1.28x	1.39x	+0.10x
Headroom over the 1.20x covenant at the tightest point	0.08x	0.19x	+0.10x
Peak revolving facility drawn	R37.5m	R37.5m	Unchanged
Facility headroom at the peak	R2.5m	R12.5m	+R10.0m
Enterprise value, ten-year DCF	R10.9m	R10.9m	Broadly unchanged
Equity IRR, ten-year hold	12.81%	12.80%	Broadly unchanged
Balance sheet check, maximum error	0.00	0.00

The optimisation buys covenant headroom, not return. Enterprise value and equity IRR are essentially unchanged because a longer amortisation profile shifts the timing of principal repayment without altering the cash the business generates. That is precisely the point: it removes a structural fragility at no economic cost, which is why it should be negotiated rather than accepted as presented.