Pan African mortgage lender Shelter Afrique can breathe easy after bond holders allowed it to renegotiate its short-term loans over the next two months.
The lender had stacked up short-term debt during the last quarter of 2016 after negative information surrounding the credibility of its financial statements and provisioning policies came out into the public domain.
Due to this, it was unable to access adequate funding from its lending partners thus experiencing liquidity constraints that made it difficult to underwrite new business and meet some obligations.
The lender’s auditors even questioned the viability of the company, stating that a lot of uncertainty hung over its ability to survive.
“A material uncertainty related to the going concern. The board commenced a turnaround plan to address the liquidity risk which the company has been facing,” the auditors said in their financial statement.
“These events or conditions along with other matters indicate a material uncertainty that may cast significant doubt on the company to continue as a going concern.”
Management has, however, managed to convince the bond-holders to give them approval to complete the restructuring that has been in the works over the last 15 months.
“We can now go ahead with signing the Standstill Agreement which will close in June. I am happy that we can now move ahead, and I’m confident since a lot of work has already been done over the last 15 months,” said Shelter Afrique Managing Director Femi Adewole.
Corporate loan
Shelter Afrique, which had a Sh5 billion bond, had paid most of the corporate loan remaining with a balance of Sh825 million.
The lender has maintained that it is able to settle the bond when it comes due in September but needed to negotiate other short-term loans to manage its balance sheet.
However, capital market regulations required the bond-holders’ approval to structure the loans.
