Distressed Tongaat Hulett to continue with business rescue plan to sell off assets
While the asset transaction will take longer to execute, Tongaat says it doesn’t expect any material impact on the company’s operations, its employees, creditors, suppliers and customers.
A screengrab of sugar products made by Tongaat Hulett. Picture: https://www.tongaat.com/stakeholder-value-creation/videos/
JOHANNESBURG - Distressed sugar producer, Tongaat Hulett, says it will continue with a business rescue plan to sell off its assets as shareholders look set to get the bitter end of the deal.
The company’s shareholders recently voted against a debt-for-swap by winning bidder, Vision Consortium.
The debt-for-equity swap, which is part of Vision’s business rescue plan, would have boosted the company’s thin balance sheet in exchange for Vision taking a majority stake at the troubled sugar giant.
The approved business rescue plan had two alternative transactions.
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After shareholders voted against the equity transaction, the company is left with a second option to sell its assets to Vision Consortium.
This would result in the company’s shares having zero value, the subsequent delisting of Tongaat from the JSE and the shell being liquidated.
The business rescue practitioners (BRP) at Tongaat say they’re unclear why shareholders vetoed what was considered the most efficient option to get the sugar producer out of business rescue.
But they say they’re upbeat about the company’s future.
While the asset transaction will take longer to execute, Tongaat says it doesn’t expect any material impact on the company’s operations, its employees, creditors, suppliers and customers.
The reassurances come on the back of concerns about the impact on the local economy and jobs.
The company has again snubbed counter-proposals to save the company, including one from Mozambican retailer, RSG Group.
RSG was initially in the running to take over Tongaat but pulled out at the eleventh hour, leaving Vision Consortium in a one-horse race.
In its latest interim report, the company’s BRPs reiterated that "the business rescue plan containing the Vision parties’ proposal, to be executed through Vision Investments 155, was approved and adopted by an overwhelming majority of creditors on 11 January 2024. The approved BR plan remains binding on the company and all affected persons, and the business rescue practitioners remain obligated to implement the approved BR plan".
Tongaat went into business rescue into 2022 after an investigation uncovered accounting fraud by top executives who allegedly inflated the company's profits.
Tongaat Hulett’s inflated profits were used to justify hefty bonuses and share options for the top executives but later set the company back with a R12 billion in write-down in its value.