Preamble and Purpose
Effective debt management is fundamental to the Company's financial stability, liquidity, and long-term sustainability. This template provides the Board of Directors (the "Board") of [Company Name] (the "Company") with a comprehensive overview of the Company's debt portfolio, repayment schedules, associated risks, and compliance with financing covenants. It facilitates proactive oversight and decision-making regarding the Company's borrowing activities.
1. Debt Portfolio Overview and Tracker
This section provides a summary of all outstanding debt obligations of the Company as of [Insert Date of Report].
| Debt Instrument (Source) | Principal Amount (Rands) | Currency (if not ZAR) | Current Outstanding Balance (Rands) | Interest Rate (Type & %) | Repayment Frequency | Next Repayment Date | Maturity Date | Collateral/Security | Covenants (Key) | Status/Comments (e.g., On Track, Restructured, Watchlist, Facility Utilisation) | Responsible Manager |
| Bank Loan 1 (e.g., FNB Term Loan) | R 5,000,000 | ZAR | R 4,800,000 | Prime + 1% (Floating) | Monthly | 2025-08-15 | 2029-07-31 | Property A | Debt-to-Equity | On Track. Utilisation: 96% of facility | Finance Manager |
| Equipment Lease (e.g., Standard Bank Asset Finance) | R 1,200,000 | ZAR | R 950,000 | 9.5% (Fixed) | Monthly | 2025-08-20 | 2027-04-30 | Equipment B | None specific | On Track. Asset fully operational. | Operations Manager |
| Revolving Credit Facility (e.g., Absa Overdraft) | R 3,000,000 | ZAR | R 1,500,000 | Prime + 2% (Floating) | Ad-hoc | N/A | 2026-12-31 | Book Debts | Current Ratio | Facility utilised 50%. Regular monitoring for working capital needs. | Finance Manager |
| Intercompany Loan (if applicable) | R 800,000 | ZAR | R 800,000 | 6% (Fixed) | Annually | 2026-03-31 | 2028-03-31 | None | None | Short-term funding for project X. | Group Finance |
| Total Debt Outstanding: | R [Sum of all outstanding balances] |
2. Debt Management Oversight Checklist for the Board
This checklist ensures comprehensive board oversight of the Company's debt obligations and related financial risks.
1. Current Debt Portfolio Review:
- Has the Board reviewed the current debt portfolio, including total outstanding debt, average cost of debt, and maturity profile? (Yes/No)
- Are there any significant concentrations of debt maturing in the short to medium term that could pose refinancing risk? (Yes/No)
- Are the terms and conditions of all debt instruments fully understood by the Board, particularly regarding early repayment penalties, draw-down conditions, and termination clauses? (Yes/No)
2. Interest Rate Risk Management:
- What proportion of the Company's debt is subject to floating interest rates vs. fixed interest rates? (e.g., [X]% Floating, [Y]% Fixed)
- Has management provided an assessment of the potential impact of interest rate fluctuations (e.g., a [Z]% increase in prime rate) on the Company's profitability and cash flow? (Yes/No)
- Are there any hedging strategies (e.g., interest rate swaps) in place or under consideration to mitigate interest rate risk? (Yes/No/N/A)
3. Covenant Compliance and Monitoring:
- Are there any financial or non-financial covenants associated with the Company's debt facilities (e.g., Debt-to-Equity Ratio, Debt Service Coverage Ratio, Current Ratio)? (Yes/No)
- Has management reported on the Company's current compliance status with all covenants as of [Date of Report]? (Yes/No)
- Are there any current or projected breaches of covenants, or any that are approaching critical thresholds? (Yes/No)
- If a breach is identified or anticipated, has management presented a clear plan to address it (e.g., negotiation with lenders, capital injection, asset sales)? (Yes/No/N/A)
- Is there a robust system in place for the regular monitoring and reporting of covenant compliance to the Board? (Yes/No)
4. Liquidity and Repayment Capacity:
- Has the Board reviewed the Company's projected cash flows to ensure sufficient liquidity to meet all scheduled debt repayments over the next 12-24 months? (Yes/No)
- Has management performed stress-testing on the Company's ability to service debt under adverse scenarios (e.g., revenue decline, cost increases)? (Yes/No)
- Are undrawn credit facilities or other liquidity buffers adequate to cover unforeseen cash flow shortfalls or refinance maturing debt? (Yes/No)
5. Debt Strategy and Optimisation:
- Is the current debt structure optimal for the Company's strategic objectives and risk appetite? (Yes/No)
- Has management explored opportunities for debt optimisation (e.g., refinancing at lower interest rates, extending maturities, diversifying funding sources)? (Yes/No)
- Are there any plans for new debt facilities or capital raising in the near future? If so, have these been presented to the Board? (Yes/No/N/A)
6. Documentation and Reporting:
- Are all debt agreements, security documents, and related correspondence centrally maintained and readily accessible? (Yes/No)
- Does the Board receive regular and timely reports on debt levels, interest expenses, repayment schedules, and covenant compliance? (Yes/No)
- Are all discussions and decisions related to debt management duly documented in the board meeting minutes? (Yes/No)
3. Board Resolution for Debt Management Acknowledgment
RESOLVED THAT:
- The Board of Directors of [Company Name] hereby acknowledges receipt and has reviewed the Debt Management Tracker and the accompanying report on the Company's debt portfolio, financial covenants, and repayment schedules as of [Insert Date of Report].
- The Board notes the Company's current debt position, its ability to meet present and projected debt obligations, and its compliance status with all relevant financial and non-financial covenants (or acknowledges any identified breaches/risks and the proposed mitigation plan).
- Management is hereby directed to continue to:
- Diligently monitor the Company's debt levels, repayment schedules, and covenant compliance.
- Report any material changes in the debt portfolio, potential covenant breaches, or significant debt-related risks to the Board immediately.
- Proactively explore opportunities for debt optimisation and effective risk management strategies, including interest rate and foreign exchange hedging where appropriate.
Signed by the Chairperson on behalf of the Board:
[Chairperson's Full Name & Signature]
Chairperson of the Board
Date: [Date of Board Meeting where reviewed/approved]
4. Supporting Documents (To be attached to the Board Pack)
- Detailed Debt Schedule (if more granular than the tracker provided).
- Management's Debt Management Report, including:
- Analysis of interest rate exposure.
- Covenant compliance calculations and projections.
- Liquidity forecast highlighting debt servicing capacity.
- Report on any identified debt-related risks and proposed mitigation strategies.
- Relevant sections of financing agreements for new or critical debt.
