Currently viewing: Financial instruments at fair value through profit or loss | Next: Related parties
Changes in the instruments are as follows:
| Surety loan receivable R'000 |
Loans receivable carried at fair value R'000 |
SPV5 derivative liability R'000 |
Class B Preference Shares R'000 |
Derivative liability R'000 |
Other R'000 |
Total R'000 |
||
| Balance as at 1 June 2021 | 83 713 | 126 604 | (68 178) | 8 258 | 150 397 | |||
| Additions | — | 49 524 | — | — | — | (200) | 49 324 | |
| Repayments | — | (3 003) | — | — | — | (8 822) | (11 825) | |
| Derecognition on termination recognised in profit or loss | — | — | — | — | 68 178 | — | 68 178 | |
| Recognition of new instrument recognised in profit or loss | — | — | — | — | (22 000) | — | (22 000) | |
| Fair value gain recognised in profit or loss | 12 859 | 4 208 | — | — | — | 564 | 17 631 | |
| Other movements | — | (126 604) | — | — | — | — | (126 604) | |
| Balance as at 31 May 2022 | 96 572 | 50 729 | — | — | (22 000) | (200) | 125 101 | |
|---|---|---|---|---|---|---|---|---|
| Additions | — | — | — | (66 859) | — | — | (66 859) | |
| Repayments | — | (13 540) | — | — | — | — | (13 540) | |
| Derecognition on termination recognised in profit or loss | — | — | — | — | — | — | — | |
| Recognition of new instrument recognised in profit or loss | — | — | (13 214) | — | — | — | (13 214) | |
| Fair value gain recognised in profit or loss | 32 743 | 9 412 | 2 164 | 16 085 | 22 000 | 86 | 82 490 | |
| Other movements | — | (1 737) | — | — | — | 114 | (1 623) | |
| Balance as at 31 May 2023 | 129 315 | 44 864 | (11 050) | (50 774) | — | — | 112 355 | |
| Financial assets at fair value through profit or loss – included in current assets | 16 164 | 44 864 | — | — | — | — | 61 028 | |
| Financial assets at fair value through profit or loss – included in non-current assets | 113 151 | — | — | — | — | 113 151 | ||
| Financial liabilities at fair value through profit or loss – included in non-current liabilities | — | — | (11 050) | (50 774) | — | (61 824) | ||
| 129 315 | 44 864 | (11 050) | (50 774) | — | — | 112 355 | ||
| Unrealised gains/(losses) | 32 743 | 9 412 | (11 050) | 16 085 | — | — | 47 190 |
Surety loans relate to the personal sureties that B Levy and M Levy signed for the US Dollar denominated loan owed by 2DFine Holdings Mauritius to Gold Label Investments Proprietary Limited. Their liability is limited to the difference between the loan owing to Gold Label Investments Proprietary Limited and the value of 16.95% of the shares in Oxigen Services India Private Limited (Oxigen Services) and 17.29% of the shares in Oxigen Online Services India Private Limited (Oxigen Online). In November 2021 the payment terms for the surety loans were renegotiated, with the payments being agreed as instalments payable annually commencing on 30 September 2023 and ending on 30 September 2030.
As part of the fraud recoupment, the Group received the right to a loan, amounting to R73 million, advanced to a third party. The loan bears interest at prime overdraft rate and is repayable by 30 June 2026. Interest was payable up to 30 June 2022 and thereafter interest and capital are payable. In addition to the interest payments required, the borrower had the right to pay R10 million capital by 1 July 2022 in return for a R4.2 million discount in the capital amount of the loan. It is the Group's view that this right results in the contractual cash flows failing to meet the requirements for amortised cost accounting, causing the loan to be measured at fair value through profit or loss. This right was not exercised. The fair value of the loan reflected a market-related interest rate of prime plus 5% and credit risk-adjusted expected cash flows. Prior to year-end, a settlement agreement was signed, stipulating the final payment due and payable. These terms were incorporated into the year-end valuation of the loan receivable.
A debt owing to a lessor by Cell C was transferred into a new special purpose vehicle (SPV5) in exchange for a 10% shareholding in Cell C (being the only asset of the SPV).
When the funds are advanced by TPC to SPV5 they will be treated as an additional 10% investment (without voting rights) in Cell C because the shares in Cell C are the only means that the SPV has with which to repay TPC's loan. As a result, TPC's loan commitment is an in-substance written put option over the economic interest of SPV5's shareholding in Cell C, which meets the definition of a derivative. Accordingly, TPC has accounted for its loan commitment to SPV5 as a derivative at fair value through profit or loss. The derivative is initially recognised by the Group at fair value and subsequently measured at fair value through profit or loss.
| SPV5 Derivative liability R'000 |
||
|---|---|---|
| Funds borrowed (R'000) | — | |
| Transaction costs (R'000) | — | |
| Effective interest rate (%) | N/A | |
| Value at 31 May 2023 (R'000) | 11 050 |
TPC issued Class B Preference Shares to the funders for a nominal issue price.
Given that the indexation of the cash flows under the Class B Preference Shares to a 5% shareholding in Cell C results in them containing an embedded derivative which would otherwise need to be stripped out and accounted for separately, the Class B Preference Shares have been designated to be financial liabilities at fair value through profit or loss. The preference shares are initially recognised by the Group at fair value and subsequently measured at fair value through profit or loss.
| Class B Preference Shares R'000 |
||
|---|---|---|
| Funds borrowed (R'000) | 66 859 | |
| Transaction costs (R'000) | — | |
| Effective interest rate (%) | N/A | |
| Value at 31 May 2023 (R'000) | 50 774 |
On 15 December 2021, BLT concluded a put option agreement with Digital Ecosystems Proprietary Limited (DE), formerly Blue Label Mobile Proprietary Limited, in terms of which DE acquired the right to put up to 40% of the shares in Airvantage to BLT no earlier than 15 December 2022 for a maximum amount of R110 million. If Cell C Limited, through a Board resolution, passes a solvency and liquidity test prior to 15 December 2022, the put option will be terminated.
On 26 August 2022, in anticipation of the Cell C recapitalisation, the put obligation was terminated by DE.
