Warbler Labs has signed a term sheet with Tugende agreeing in principle to a comprehensive restructuring plan that may result in a material recovery for the Goldfinch Senior Pool. Further updates will be provided once significant milestones in the process have been achieved.
- If the restructuring successfully closes at the indicated terms, the potential net write-down of the senior pool’s NAV due to the Tugende default may be reduced from approximately 3.95% to less than 0.79%.
- Based on the current facts and circumstances, including legal work and any necessary regulatory approvals, the restructuring and first payment are expected to occur prior to the end of 2023. However, it could be delayed due to unforeseen issues that may arise.
Note, this post is a follow-on from this previous update on the Tugende facility sent to the Goldfinch community on 28 July 2023, and on February 25th, 2023, Warbler Labs was appointed by the Goldfinch community, based on this vote, to represent them.
- Tugende is a motorcycle taxi (i.e., boda-boda in Swahili) financing company headquartered with it’s primary hub for operations in Uganda. In markets where the alternative is for operators to rent motorcycles at exorbitant costs and into perpetuity, Tugende provides affordable financing that allows these operators to own their motorcycles and double their profits from $5/day to $10/day after following repayment of the lease.
- In October 2021, the Goldfinch Protocol made a $5M loan to Tugende Kenya (Tugende’s Kenya subsidiary), set to mature in October 2023.
- After discovering covenant breaches in Tugende’s reporting in December 2022, the Warbler team alerted the Goldfinch community via this post on 15th February 2023 and asked that the Warbler team represent the community in resolving these breaches.
- On the back of this, and after many months of liaising with Tugende, its lenders, and various external stakeholders, it became clear to the Warbler team that the Tugende facility would need to be restructured, potentially leading to material losses to the Goldfinch senior pool. We alerted the community of this finding via this governance post on 28th July 2023.
- Since the above 28th July 2023 post, Warbler Labs as appointed by the Goldfinch community has worked with Tugende, its +10 debt lenders, equity investors, and Warbler Labs external counsel to agree on a restructuring plan that maximizes the recovery for the Goldfinch community and returns Tugende’s focus on serving its network of 70,000+ customers.
- As communicated in this earlier governance post, the write-down of the senior pool’s NAV has begun. It will continue until 22 October 2023. During this 120-day write-down period, without any restructuring or new payments, there will be a net write-down of 3.95% of the senior pool’s NAV (-6.31% from Tugende + 2.36% in new interest from other borrowers = 3.95% write-down), resulting in a trailing 12-month APY of 1.5% for the senior pool.
Where Are We Now:
- To that end, we can share today that we have arrived at a restructuring agreement in principle between Warbler, Tugende, a strategic investor, and other Tugende investors, that we believe maximizes the recovery for the Goldfinch community.
- As there are more than 10 parties involved in the negotiations, the details of the restructuring plan cannot be shared at this time due to a confidentiality agreement that is currently in place. More precise details will be shared once all relevant parties have given their consent to share the information, or once the transaction is closed and all details are finalized.
What this means for Goldfinch and the Senior Pool LPs:
- If the restructuring successfully closes at the current terms under discussion, the potential net write-down of the senior pool’s NAV during the 120-day writedown period would be approximately 0.79%, and would result in a trailing 12-month APY of 4.64% for the senior pool
- This comes from the Tugende loss potentially being reduced from approximately 6.31% → 3.15%, plus the existing repayments from other borrowers over the same time period generating ~2.36%. Thus -3.15 + 2.36 = -0.79%. These numbers are approximate and subject to change based on the final outcome of the restructuring, and/or performance of other borrowers on Goldfinch.
- Any payments that come into the senior pool as a result of this restructuring will serve to partially reverse this write-down based on the corresponding amount of those payments.
- Further updates will be provided once significant milestones in the process have been achieved.
- Based on the current facts and circumstances, including legal work and any necessary regulatory approvals, the restructuring is expected to close prior to the end of 2023. However, it may be delayed if unforeseen issues arise.
We appreciate that the community will have more questions as it relates to this restructuring. We continue to work collaboratively and constructively with Tugende and its many internal stakeholders to arrive at as speedy a resolution as possible here. Please be on the lookout for more updates and for additional details on the restructuring and recovery plan. We will be sharing these as soon as we can.