FINANCIAL GUARANTEE CONTRACTS
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the company are initially measured at their fair values and are subsequently measured at the higher of:
- The amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and
- The amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18 Revenue.
Where guarantees in relation to loans to related parties are provided for no compensation, the fair values are accounted for as capital contributions and recognised as part of the cost of the investment.
The company along with other subsidiaries has guaranteed the bonds, revolving credit facilities and general banking facilities of Mobile Telephone Networks Holdings Limited and MTN (Mauritius) Investments Limited under the terms of the guarantee. The company will make payments to reimburse the lenders upon failure of the guaranteed entity to make payments when due.
| |
Face value |
|
Drawn down balance2 |
|
| |
2017
Rm |
|
2016
Rm |
|
2017
Rm |
|
2016
Rm |
|
| Bond guarantees |
|
|
|
|
|
|
|
|
| Bonds1 and commercial paper |
20 000 |
|
20 000 |
|
5 957 |
|
3 259 |
|
| Syndicated and other loan facilities |
|
|
|
|
|
|
|
|
| ZAR long-term loan |
23 738 |
|
23 800 |
|
18 238 |
|
18 615 |
|
| US$ long-term loan |
24 748 |
|
27 445 |
|
10 518 |
|
11 676 |
|
| General banking facilities |
|
|
|
|
|
|
|
|
| ZAR facilities |
2 000 |
|
3 000 |
|
– |
|
778 |
|
| |
70 486 |
|
74 245 |
|
34 713 |
|
34 328 |
|
| 1 |
These bonds are listed on the Bond Exchange of South Africa. |
| 2 |
Includes interest accrued. |
In addition, the company has provided unrestricted suretyship with regards to the cash management facility of Mobile Telephone Networks Holdings Limited and suretyship to the amount of R5 850 million (2016: R5 850 million) with regard to the banking facilities of Mobile Telephone Networks Proprietary Limited, MTN International (Mauritius) Limited, MTN International Proprietary Limited, Mobile Telephone Networks Holdings Limited and MTN Service Provider Proprietary Limited.
The company together with other subsidiaries in the MTN Group guaranteed senior unsecured notes issued by MTN (Mauritius) Investments Limited on the Irish Stock Exchange amounting to US$1 750 million (2016: US$1 750 million). A financial liability was recognised at the fair value of the guarantees issued. A fee was not charged by the company providing the guarantee and therefore the benefit provided by the company to its subsidiaries was recognised as a capital contribution.
The company, together with other subsidiaries in the group, guaranteed US$ syndicated loan facilities with Citibank amounting to US$1 billion (2016: US$1 billion). An amount of US$450 million was drawn down by MTN International (Mauritius) Limited during the prior year. A financial liability was initially recognised at the fair value of the guarantee issued. A fee was not charged by the company providing the guarantee and therefore the benefit provided by the company to its subsidiaries was recognised as a capital contribution.
The company’s financial liability relating to financial guarantee contracts amounts to R2 631 million (2016: R3 499 million) as at 31 December 2017 and R581 million (2016: R296 million) was amortised to profit or loss for the year.
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