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POST-COMMENCEMENT FINANCE EXTENDED
The business rescue practitioners from Metis Strategic Advisors today confirmed that they have reached an agreement with the Company’s current funders to extend the post-commencement funding facility to 6 October 2023.
This will allow the Company to deliver on operational and business rescue requirements while the approval process for longer-term funding is finalised.
TONGAAT HULETT LIMITED BUSINESS RESCUE UPDATE – PREFERRED BIDDER SELECTED
The business rescue practitioners (BRPs) today announced that the preferred strategic equity partner (SEP) has been selected.
The proposed transaction will comprise the acquisition of the complete sugar division of Tongaat Hulett Limited (THL) in South Africa and the investments in Zimbabwe, Mozambique and Botswana (Tongaat Sugar Assets).
The selected SEP, Kagera Sugar Limited (Kagera), is a sugar manufacturing company situated in Kagera in the North-Western part of Tanzania. It is part of a group of companies which are the largest producers of sugar in Tanzania and owns sugar assets in Tanzania, the Democratic Republic of Congo and the Middle East.
The BRPs commented:
We started the process with a list of more than 70 interested parties, which was narrowed down to eight that focused on acquiring the combined Tongaat Sugar Assets. After a rigorous process, we identified Kagera Sugar as the preferred candidate. The group is financially sound, with a solid track record. Its exposure to complementary sugar assets in Tanzania and the Democratic Republic of Congo offers relevant technical and operational knowledge to assist the turnaround of THL’s South African sugar assets. In addition, the sugar refineries in Oman and Bahrain will provide access to world-class technologies and expertise to improve efficiencies.
Continuing to operate Tongaat Sugar Assets as a combined multi-country group will ensure continuity for the operations in Mozambique, Zimbabwe and Botswana. It will also provide the South African business with access to technical capability to improve and to retain jobs in KwaZulu-Natal and to protect the livelihoods of several stakeholders across THL’s value chain, including that of the group’s many small-scale growers.
Mr Nassor Seif, Managing Director of Kagera Sugar Ltd, commented:
The acquisition is in line with the group’s overall strategy to expand its operations throughout Africa, and its vision of becoming a leading sugar producer on the continent. We will extend the core values that have resulted in the success of our Group companies to the new Southern African operations to benefit employees, growers and ultimately the economy of the region. The Group is committed to investing significantly in the operations to modernise the plants and expand them to increase production and efficiencies.
Additional information on the process and the preferred bidder will be reported to creditors in monthly reports and included in the updated business rescue plan.
POST COMMENCEMENT FINANCE FACILITY EXTENSION SECURED & UPDATE ON PAYMENT OF SASA OBLIGATIONS
The business rescue practitioners (BRPs) today announced that they have reached agreement with current funders to extend the post-commencement funding facility from 30 June to 21 July 2023 pending finalisation of negotiations aimed at obtaining a longer term extension.
The BRPs commented:
We thank our funders for their continued support. The ongoing funding does allow the Company to continue delivering on operational and business rescue requirements as in the past.
The BRPs also clarified recent comments around the payment of levies to the South African Sugar Association (SASA) and confirmed that all payment obligations from 1 April 2023 have been complied with.
TONGAAT HULETT BUSINESS RESCUE UPDATE: CREDITORS SUPPORT ADJOURNING THE BUSINESS RESCUE PLAN VOTING
Voting on the business rescue plans of Tongaat Hulett Limited (THL) and its subsidiaries, Voermol Feeds (Voermol) and Tongaat Hulett Sugar SA (THSSA), to be postponed
The business rescue practitioners (BRPs) today confirmed that 85% of the total claims of creditors of THL (94% for Voermol and 78% for THSSA) voted regarding motions to:
- adjourn (postpone) the meeting to vote on the published business rescue plans
- allow the BRPs to amend the business rescue plans to take into account various developments
Of those creditors present and voting, 100% voted in favour of these motions. Accordingly, creditors will consider and vote on the amended business rescue plans by no later than 30 September 2023.
The BRPs commented:
The BRPs have always preferred to publish a business rescue plan containing details relating to specific transactions. Since the release of the business rescue plans, we have continued discussions with a range of parties and agreed that updating the business rescue plans with additional details in terms of the strategic equity partner process and other matters would be in the best interests of creditors before they are requested to vote. As is clear, the creditor bodies agreed with this.
The postponement is therefore a positive step, as it creates increased certainty for affected persons as it will allow for the outcome of the SEP process and the associated consequences on the claims against the company to be outlined in greater detail in an amended business rescue plan.
Engagement with the potential strategic equity partners interested in acquiring the whole of THL and/or the SA Sugar businesses and/or parts thereof will continue despite the adjournment. The postponement does not impact the operations, with the same workstreams, as set out in the currently published business rescue plans, to continue.
Voermol – BR Status Report – May 2023
BUSINESS RESCUE UPDATE
Plans of Tongaat Hulett Limited and its subsidiaries, Voermol Feeds* and Tongaat Hulett Sugar SA*, released today
Key achievements to date
- Growers – Total cane grower claims before business rescue of c.R1 billion paid in full to assist with stability in the industry. All post business rescue supplies of c.R400 million also paid in full
- Unsecured creditors – Payment for goods and services since the commencement of business rescue of c.R3 billion
- Employees – c.2 500 employees remain employed on the same terms and conditions as before business rescue. Monthly salaries and wages bill of c.R110 million (R650 million since commencement of business rescue) has been paid to date
- Off-crop capital expenditure – In excess of R400 million invested during the annual off-crop capital maintenance period between December 2022 and April 2023. This is the most comprehensive maintenance performed in many years
- When the business entered business rescue in October 2022, the operations were brought to a standstill as there was no free cash available to fund operations or to settle creditors or employees
- In only a few weeks, the business rescue practitioners (BRPs) secured post-commencement finance (PCF) from THL’s lender group of c.R900 million to fund short-term working capital requirements. This allowed the South African operations to re-start
- Replacement PCF of c.R1,2 billion was secured from the IDC within two months of entering business rescue. This enabled the completion of the 2022 sugar season and the off-crop programme required to commence the 2023 season. The BRPs are working closely with the IDC in an endeavour to extend the funding arrangements and securing a new strategic equity partner
The business rescue practitioners (BRPs) commented:
A constant factor in our minds in the execution of this business rescue is the enormous social impact of the businesses under our care. It is beyond question that the successful rescue of especially THL’s sugar operations in South Africa will save tens of thousands, possibly hundreds of thousands, of direct and indirect jobs. We take this responsibility very seriously and are confident that Tongaat Hulett has a future.
We have made significant progress towards securing a potential strategic equity partner with a view to developing a long-term sustainable business solution. We are also grateful to have been able to stay up to date with grower, unsecured creditor and employee payments. We thank the lender group and the IDC for their support.
The lender group has security over all material assets of THL, except the cash balances, stock and debtors, which the lender group released to the IDC for security of their PCF, over which the lender group has a right to register a reversionary cession.
The BRPs added:
We are cognisant of the effect of non-payment to unsecured creditors. As part of the business rescue plan, we have agreed with the lender group that they will share 15% of their proceeds from the sale of the SA Sugar businesses and/or assets with unsecured creditors. This contribution will be set at a minimum of R45 million and a maximum of R90 million. This will ensure a benefit uplift to unsecured creditors relative to the anticipated liquidation dividend of zero if the company were to be placed in liquidation.
The proceeds will be distributed to unsecured creditors pro-rata to their claims.
Business rescue plan information
The planned actions for the business rescue include:
- A continued effort to optimise the operations and cost base of the THL businesses and head office – the Operational Restructuring
- Sell and/or seek investment in all of the sugar-related assets and businesses currently comprising the THL Group, either collectively or individually – the Corporate Restructuring. This is subject to relevant secured creditor consent
There are several potential purchasers of and/or investors interested in THL and/or its assets and/or its businesses:
- In February 2023, the BRPs started engagements with potential strategic equity partners (SEPs) interested in the acquisition of, or investment in, the whole of THL and/or the SA Sugar businesses and/or parts thereof
- Selected SEPs are required to demonstrate the following criteria:
- interest in THL as a whole or in SA Sugar
- technical expertise and operational ability
- balance sheet strength and substantial access to funding
- a plausible business case being presented for the future of the THL or SA Sugar business
- valuation of the relevant assets that demonstrates a likely ability to conclude a transaction
Number of SEPs
Whilst a substantial number of potential SEPs were initially considered, this has been narrowed down to eight potential SEPs. They are well advanced in their due diligence processes, which are expected to conclude around the end of May 2023. Final offers are expected to be received during June 2023.
There are various corporate restructuring outcomes. One or more SEPs (either with or without participation by IDC) may:
- acquire all of THL’s sugar assets and businesses (probably with the exclusion of certain liabilities)
- acquire only the core SA Sugar businesses, leaving the African assets to be disposed of separately
- acquire specific assets or businesses; or
- a combination or permutation of the above
If there are any unsold and/or excluded assets, the BRPs will seek purchasers through controlled, accelerated sale processes.
Creditors will vote on the business rescue plans on 14 June 2023.
Notes to editors
*Voermol and THSSA
The current THL group structure comprises of c.75 subsidiaries and associated companies. However, many of the South African and Zimbabwean companies are dormant. Certain of the legal entities trade as divisions of the Company pursuant to Agency Agreements that were entered into in the 1980s and which are in the process of being unwound.
- The most relevant of the Agency Agreements are those in relation to THSSA and Voermol. THSSA and Voermol do not conduct any activities for their own benefit that would generate revenue for themselves and are wholly financially dependent on THL. THL’s SA Sugar division is operated by the Company and pursuant to appropriate Agency Agreements between the Company and THSSA and THSSA and Voermol. As a result, the business rescue proceedings of Voermol and THSSA are wholly dependent on the business rescue proceedings and business rescue plan of THL
TONGAAT HULETT DEVELOPMENTS PROPRIETARY LIMITED (THD) BUSINESS RESCUE PLAN ADOPTED
92% of creditors voted, with 99.8% voting in favour of the plan
The business rescue practitioners (BRPs) of the property development arm of Tongaat Hulett Limited (THL), today announced that creditors voted overwhelmingly in favour of THD’s business rescue plan.
92% of creditors voted, with 99.8% voting in favour. The adopted plan will now be implemented.
Notes to editors
Please refer to https://www.tongaat.com/tongaat-hulett-developments-proprietary-limited-thd-business-rescue-plan-released-today/ for the media release issued on 19 May when the THD business rescue plan was released.
TONGAAT HULETT DEVELOPMENTS PROPRIETARY LIMITED (THD) BUSINESS RESCUE PLAN RELEASED TODAY
Holding company Tongaat Hulett Limited and fellow subsidiaries Voermol Feeds (Pty) Ltd and Tongaat Hulett Sugar SA (Pty) Ltd business rescue plans remain scheduled to be released at the end of May 2023
· The THD business rescue process aims to:
o provide opportunities for continued land development through third-party purchasers
o offer opportunities for certain affected contractors to continue with projects
o retain employment opportunities
o avoid adverse impacts on the KwaZulu-Natal property market
o address key environmental risks
o mitigate the potential risk of unfulfilled infrastructure obligations
o result in a higher distribution to secured creditors than in liquidation
· On successful implementation of the business rescue plan, secured creditors are, in aggregate, expected to receive distributions of around 7 cents in the Rand – compared to 2.5 cents forecast if the company went into liquidation
· Creditors will vote on the business rescue plan on 30 May 2023
- THD was historically dependent on Tongaat Hulett Limited (THL) for access to working capital facilities. The financial stability of THD was therefore inextricably linked to the financial stability of THL. THD, together with certain other members of THL, granted guarantees and provided security in respect of the obligations of THL under the debt facilities made available by lenders to THL
- Consequently, all material assets of THD were secured in favour of secured creditors (the THL lenders). In terms of this security provided, THL’s lenders have claimed an amount of ±R7,2 billion against THD. This, together with other business rescue claims against THD, amount to ±R7,7 billion
- This means that as a result of the guarantees given by THD to the lenders that funded THL, the direct liabilities of THD (being ±R400 million) increased by the guarantees given to the THL lenders (the extent of such claims being ±R7.2 billion), as well as post-commencement finance advanced to date (being ±R100 million)
- Therefore, due to the magnitude of THD’s liabilities, the net free estimated cash that can be released from the THD rescue will only be ±7% of the R7,7 billion claims
- Given the secured nature of the bank guarantees (and as secured creditors rank highest in a business rescue, as is required by the Companies Act), unfortunately this means that there is no likelihood of THD paying distributions to unsecured creditors
The business rescue practitioners (BRPs) commented:
Our objective is to secure an outcome which balances the interests of all stakeholders despite the difficult set of circumstances presented in the case of THD. The business rescue plan aims to mitigate a host of risks, including protecting the KwaZulu-Natal property development landscape, addressing infrastructure challenges, mitigating key environmental risks and providing enhanced returns to secured creditors and improved outcomes (compared to liquidation) for other stakeholders.
The reality is that THD’s liabilities significantly exceed the value of its assets, which will only satisfy around 7% of creditor claims. In line with the Companies Act, secured creditors (in whose favour all THD’s assets are secured) rank highest in a business rescue. Due to secured creditors’ claims of around R7,2 billion and the limited funds available to THD, the payment of a dividend to unsecured creditors is unfortunately not possible.
We realise this is a very difficult situation. We have therefore spent a significant amount of time since business rescue commencement evaluating opportunities where construction activities or property development projects could potentially continue with the support of THD’s post-commencement financiers. Discussions with these affected stakeholders are at an advanced stage.
Since entering business rescue in October last year, THD has continued to operate on a limited basis with the support of the post-commencement finance (PCF) from lenders. PCF of ±R100 million has been secured so far. Operating costs have been reduced, with cost cutting and efficiency improvement initiatives continuing. Where there is a direct short-term benefit to THD, the BRPs will aim to bring existing property developments to partial or final completion to optimise net sale cash inflows and/or to avoid payment demands for bonds or guarantees. The business rescue plan entails a structured wind down of the company, its operations and the sale of its property assets.
The BRPs recognise the hard work and collaboration of everyone involved in the THD business rescue process over the last few months:
We would like to thank secured creditors who remain supportive and are providing the necessary post-commencement finance and the City of eThekwini who is enabling an environment within which innovative and proactive solutions are being sought. We wish to acknowledge unsecured creditors, especially affected contractors, who are working with us to try to continue with projects where possible, and committed employees who are providing services to THD.
Notes to editors
THD represents the property development arm of Tongaat Hulett Limited (THL). The business model traditionally entailed the purchase of agricultural land from THL and the subsequent land conversion and development activities required to convert agricultural land into industrial, retail, office, residential or mixed-use opportunities. THD thereafter markets and sells this land, together with development rights, to third parties for further development purposes. The land owned by THD is primarily located in KwaZulu-Natal.
TONGAAT HULETT BUSINESS RESCUE UPDATE – FUNDING SECURED TO END JUNE 2023, BUSINESS RESCUE PLAN EXTENDED
- Post commencement funding (PCF) extended to end June 2023
- An extension of the business rescue plan publication date to 31 May 2023 has been approved by a majority of creditors
Tongaat Hulett Limited (THL) today announced that it has obtained an extension of the period of the PCF until the end of June 2023. This is anticipated to be sufficient for working capital purposes and provide comfort to employees and suppliers that payments should be made going forward.
In view of the confirmation of funding until June 2023, a majority of creditors has agreed to allow additional time until 31 May 2023 or the further development of a more detailed business rescue plan. This will allow the plan to contain information on a transaction and/or structure that the creditors will be asked to vote on. Discussions and negotiations are ongoing with various stakeholders. The current strategic equity partner process is also expected to result in final binding offers by 26 May 2023.
TONGAAT HULETT UPDATE – ACTING CEO APPOINTED
Tongaat Hulett today announced that the group’s current Chief Business Transformation Officer, Dan Marokane, has been appointed as the group’s acting Chief Executive Officer (CEO).
He will take over from current CEO Gavin Hudson, who is leaving the group at the end of February.
Mr Marokane joined Tongaat Hulett in 2018. He is currently the Chief Business Transformation Officer and has been a key member of the management team which led the turnaround journey of the company. He played an important role in internal cashflow optimisation programmes and the management of the company’s asset disposals. He was appointed as an executive director of Tongaat Hulett in November 2019 and was previously the chairman of the company’s listed Zimbabwean subsidiary, Hippo Valley Estates Limited.
Mr Marokane has a BSc Chem Eng, MSc Pet Eng and an MBA and has held various senior executive roles over the past 20 years in the oil and gas, power and agro-processing industries.
The company and the business rescue practitioners welcome Mr Marokane to his new role.