Ian B-- Re-post notes 1 of 217 May 2024 13:44
DRC Contract
Previously announced in 2021 as being 20yrs. However, in-country PPP laws allow for an initial contract of 10yrs. We have 10yrs with a potential 5 years extension. Note, WSG will own all kit installed. If the contract is terminated after 10yrs with no extension the DRC must pay for or return all kit. This disruption and cost would suggest that the 5yr extension is most likely to be extended.
Should the contract be terminated early, WSG will receive 5 x annual contract value, so circa $50M min.
Should there be a dispute in the T&C’s, the arbitration body that will oversee any negotiations will be an International third party, outside of any in-house political influence.
The revenue due to WSG will be paid by the individual airline carriers in US$ to WSG. The monies do not come from a DRC source of African banks etc.,
The initial funding will come from cash at hand. The remainder of the funding will come from revenue generated by the security fees, as income starts in July 2024, and most likely debt funding.
PF clearly, would not take a ‘Placing’ off the table but it was made clear that is not his preferred route. PF confirmed that the company already had several debt-based funding offers on the table. Some with attractive T&C’s and others with less attractive.
The company has time in which to engage with the various lenders with a view to getting the best deal for the company. Given they have cash at hand, I got the impression that this process will stretch in to the ‘weeks’ rather than ‘days’ timescale. When decided, it will be announced to the market.
The roll out of the works/training for the 5 airports will be an 18-24month process, but the implementation has already started with staff in country. PF will be back in the DRC within the next few weeks and MH will most likely be in country towards the of May.
The current contract is for embarking international passengers only. The company are using historic date which suggests 400k pax/annum. WSG believe this may be lower than the current pax, however, want to commence operations on the ground before they comment further. For this reason, it will most likely be 3 or 4 months before any Brokers issue any new notes on the company as there forward-looking analysis will be based upon these numbers. They will also have the debt funding structure to hand by then.
The in-country company employing local labour will be 100% owned by WSG. They will be paid by WSG, and when all airports are operational, they estimate 400 employees.
The contract does not include freight scanning and monitoring. The DRC are desperate for this become in-country as this is, at present, sent outside of country for scanning, processing, and monitoring. It is likely that existing contract will be developed to include freight handling, however, PF stated that WSG must, in the short term, concentrate on deliver the international passenger contract.
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