Letshego of Botswana defaults on loans to Kenya and Uganda

Just 15 months after warning of an imminent exit from the region this year due to deteriorating economic conditions, Botswana-based lender Letshego Holdings Ltd (LHL) has defaulted on a $30.49 million loan for its Kenya and Uganda subsidiaries and reduced 142 employment in the units.

The Botswana Stock Exchange-listed lender failed to redeem a $210.95 million debt as scheduled, resulting in a $10.82 million loss for the year ending December 31, 2023. This failure to repay the debt raises concerns about the lender’s ability to continue operations as a “going concern.”

At the reporting date (December 31, 2023), the outstanding obligations totaling approximately P2.9 billion ($210.95 million) were affected by the debt covenant infractions that were in place.

The lender’s recently released annual report for 2023 stated that management evaluated the group’s capacity to continue as a continuing concern in light of the potential implications of this performance and the existence of debt covenant breaches on the Group’s liquidity and funding pipeline.

The loan covenants on Letshego’s units in Kenya and Uganda were breached to the tune of Sh3.26 billion ($25.37 million) and Sh658.77 million ($5.12 million), respectively.

Nevertheless, the lender has implemented mitigation measures, such as discussions with funders for whom “letters of no action” have not been obtained.

The group is extremely optimistic about receiving some relief, and discussions with financiers are currently underway, according to the lender.

“In the event that the group is unable to access new funding that has been designated for its future pipeline and cannot bring forward existing facilities…According to the report, the group is expected to experience a liquidity shortfall of approximately P3.5 billion in the 13 months following the financial statements’ issuance.

In Kenya, Tanzania, and Uganda, Letshego decreased its workforce by 43, 69, and 30 employees, respectively. In Rwanda, there was a minor increase of three employees. The lender issued an alert in March of last year regarding the imminent suspension of its operations in three East African markets—Kenya, Rwanda, and Tanzania—due to the deteriorating conditions.

It classified the three regions (Kenya, Rwanda, and Tanzania) that include Ghana and Nigeria as “turnaround markets” that are currently unfit for growth. It appointed a turnaround master, Fergus Ferguson, the former Chief Executive of Botswana, who has oversight over Eswatini and Lesotho (Boleswa), as the regional CEO to oversee their recovery in 10 months. Failure to achieve this goal will result in a closure decision being made this year to prevent further financial bleeding.

“The transition of these businesses will be overseen by a competent team and the appointment of a regional chief executive.” Nevertheless, the lender asserts that geographic rebalancing will not be pursued at the expense of shareholder value, despite the fact that it remains a critical strategic discussion for the group.