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In today’s edition

• Hohm Energy in financial distress
• Kenyan banks to track high-value transactions
• Credit agencies say Liquid Intelligent Technologies is now credit-risky
• Glovo extends ads service to Nigeria
• Funding tracker
• The World Wide Web3
• Opportunities

Debt is cheaper than equity. But during low interest rate periods, it becomes tempting for companies to raise more money than they need. And that oversubscription can be problematic because debt must be paid back. 

One such company, Liquid Intelligent Technologies (formerly Liquid Telecoms), a pan-African telecommunications company, is now struggling with debt repayments. Within the last 7 years, Liquid raised $1.4 billion through debt instruments.

The raise had a debt agreement that required them to maintain a debt-to-earnings (DTE) ratio of 3.5x. This means their debt could not exceed 3.5 times their net earnings. The agreement also stated that the DTE ratio threshold is supposed to decrease to 3.0x by August 2024. However, as of the end of June, Liquid’s DTE ratio was still 3.46x.

Its next repayment schedule is due in March 2026 for a $220 million loan. Another $620 million from issued bonds is due in September 2026. Lenders are growing impatient: Liquid has to either increase its earnings or lower its debt. 

Only the former is conceivable as there’s low confidence that Liquid will meet this deadline given its slow performance. Although its revenue grew to $183.7 million in the last quarter, its profit margin took a beating to 65.5% as the company struggled with forex losses from its Zimbabwean business. Liquid still suffers from a net debt of $930.6 million.

To worsen things, credit rating agencies Fitch and Moody’s downgraded the company’s rating from B to CCC+ and B3 to Caa1 respectively, making Liquid a company with “substantial risks”.

This outlook is bad for a company that has historically been dependent on debt to finance its infrastructure-heavy telecoms business. Refinancing the business again through debt will mean getting loans at high interest rates—if at all it gets another loan. Amid all this, former CEO and deputy executive chairman, Nic Rudnick left the company.

Liquid is staying low and seeking to raise $90 million equity funding from the US International Development Finance Corporation. Question marks still hover around how the company will use the cash; a few critics question Liquid’s run-up debts that led it here.

Food delivery businesses are small-margin businesses. The businesses often offer services in adjacent verticals to earn more revenue. For example, Chowdeck, popular offers Relay, a parcel delivery service.

In July, Chowdeck also said it was building an ad-product. 

A customer base of 600,000 also meant that the startup could offer ad placement in its app. And so it did, offering slide-show banners on its app at ₦250,000 ($152) per week. The startup also advertises other businesses via push notifications, charging ₦250,000 per notification. 

Chowdeck’s move follows other businesses which are branching into advertising. In September 2023, Glovo, the Spain-based food delivery platform, launched its own ad service. This month, that service expanded to its Nigerian platform. Nigerian users were shown an ad for Jollof+, a savings product on its app. 

While advertisers are now spoilt for choice, with food delivery platforms starting to emulate the advertising models of traditional media companies, the competition between these startups to offer the most compelling and effective ad solutions has only just begun.

This week, Egypt-based fintech Lucky ONE raised $3 million in funding from Lorax Capital Partners, KEM, DisrupTech Ventures and other existing investors. (August 7th)

Here’s the other deal for the week:

• Egyptian lending startup Qardy secured a seven-figure pre-seed round of investment. The round was led by 500 Global, White Field Ventures and Vastly Valuable Ventures, with contributions from various angel investors. (August 6th)

Follow us on Twitter, Instagram, and LinkedIn for more funding announcements. Before you go, our State of Tech in Africa H1 2024 Report is out. Click this link to download it.

The World Wide Web3

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