- Home
- /
- Latest News
- /
- Page 2
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 |
Key context
- 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.
TONGAAT HULETT BUSINESS RESCUE UPDATE
Business rescue progressing well
IDC post-commencement finance secured in December 2022 aimed at completion of the current season and off-crop maintenance
Business rescue plan publication date extension required to finalise complex work streams
CEO Gavin Hudson to exit the group at end of February
Tongaat Hulett Limited (THL), Tongaat Hulett Developments, Tongaat Hulett Sugar South Africa and Voermol Feeds, today announced that the required majority of creditors have voted in favour of an extension of the date for publication of the business rescue plan from 31 January 2023 to 28 February 2023. The extension was requested to allow further time to progress the complex work streams.
During the last few months, the business rescue practitioners (BRPs) have been engaged in securing post-commencement finance for the company, meeting with affected persons and other stakeholders and investigating the affairs of the company, which are very complex.
The BRPs confirmed in December 2022 that Industrial Development Corporation of South Africa (IDC) has advanced post commencement finance to fund the working capital requirements and off-crop maintenance. This key step in the business rescue process allows the BRPs to focus on the next phase of the business rescue proceedings aimed at achieving successful business rescues for THL and its underlying businesses.
The group also announced that current CEO, Gavin Hudson, has tendered his resignation with effect from 28 February 2023. His core team of executives will continue to work with the BRPs.
Hudson spearheaded efforts to recover the group four years ago following the discovery of accounting irregularities in 2019. This involved reducing the group’s debt burden by R6.5 billion and turning around governance and operational processes. Unfortunately, these turnaround efforts were hampered by COVID-19, civil unrest and floods in KwaZulu-Natal and the Company commenced business rescue proceedings in October 2022.
The BRPs and remaining board members thank Hudson for his contribution and wish him well in his future endeavours.
TONGAAT HULETT BUSINESS RESCUE UPDATE – ADDITIONAL FUNDING SECURED
Post commencement finance secured from Industrial Development Corporation
Allows the group to complete the current milling season and finalise off-crop maintenance and capital expenditure
Tongaat Hulett Limited (Tongaat Hulett) today announced that Industrial Development Corporation of South Africa (IDC) has advanced post commencement finance (PCF) sufficient to fund the Tongaat Hulett businesses’ working capital requirements and off-crop maintenance and capital expenditure.
The business rescue practitioners (BRPs) commented:
This is a meaningful step forward in the business rescue process as it provides the business and affected stakeholders with confidence that Tongaat Hulett can complete the current milling season, carry out necessary off-crop maintenance and capital expenditure and prepare for the start the 2023/4 season.
This funding ensures that we are able to continue making payments to employees, growers and other suppliers whose livelihoods depend on Tongaat Hulett. We thank IDC for the speed of implementation and their pragmatic approach and thank all other stakeholders for their continued commitment to and support of Tongaat Hulett.
This key step in the business rescue processes enables the BRPs to focus on the next phase of the business rescue proceedings aimed at achieving successful business rescues for the underlying Tongaat Hulett businesses. Further updates will be provided as the rescues progress.
TONGAAT HULETT LIMITED; TONGAAT HULETT DEVELOPMENT ENTER BUSINESS RESCUE IN SOUTH AFRICA
- Tongaat in South Africa is not being liquidated – business rescue is an endeavour to proactively protect businesses, jobs, creditors and other stakeholders
- The Board believes business rescue is the most responsible action given the financial position of the Company, as business rescue is likely to result in a better return to creditors than liquidation
- Botswana, Mozambique and Zimbabwe operations are NOT entering business rescue
- Business rescue provides financially distressed companies with a period during which the rights of claimants to take action against the company are suspended
- Business rescue practitioners appointed; will convene meetings with employees and creditors within ten days
Tongaat Hulett (“Tongaat” or “the Company”) today advised shareholders that the Board has commenced voluntary business rescue proceedings for two operations in South Africa, Tongaat Hulett Limited and Tongaat Hulett Development Proprietary Limited. These operations are planned to move ahead under the business rescue process.
The Board believes that business rescue is the most responsible step in the circumstances. Business rescue is a legal process governed by the Companies Act. The Board believes business rescue should potentially result in a better return to stakeholders than a forced liquidation.
Tongaat has faced significant challenges following years of high and increasing debt levels, alleged financial misstatements and historic mismanagement under previous leadership. The new leadership team and Board have worked tirelessly since 2019 on delivering a comprehensive turnaround strategy. Good progress was made on a variety of fronts, including realising cost savings and improving available funding. Debt, specifically, has been reduced by more than R6.6 billion from a high of R11.7 billion. Despite the good progress, there is a shortfall in the Company’s working capital facilities of approximately R1.5 billion, largely driven through the impact of COVID-19 and the recent unrest in KwaZulu-Natal. This shortfall is necessary to fund the peak working capital requirements to complete the 2023 financial year.
The South African lender group has unfortunately informed the Company that they will not be able to continue supporting the company with additional funding in South Africa.
Without this funding, the Board concluded that Tongaat is, or would be, facing “financial distress”, as defined by the Companies Act and that the South African operations are no longer financially sustainable without further liquidity. In this context, the Board has resolved to commence voluntary business rescue proceedings for the Company in line with Companies Act. The Board resolution and a sworn affidavit stating the reasons for going into business rescue has been filed with the Companies and Intellectual Property Commission (CIPC), with the finalisation of their processes in development.
Peter Van den Steen, Trevor Murgatroyd and Gerhard Albertyn of Metis Strategic Advisors will be appointed as the business rescue practitioners and are highly experienced and well-qualified, having completed various high-profile business rescues in South Africa in recent years.
Tongaat CEO Gavin Hudson said: “Although this is not the outcome we were hoping for, the start of business rescue is not the end for Tongaat Hulett’s South African operations. Business rescue provides a legal framework that allows the business rescue practitioners to work with key stakeholders to find optimal solutions to our financial difficulties. Tongaat has a proud 130-year legacy and is a significant player in agriculture in South Africa. We have dedicated people working very hard to find the best way forward, and the leadership team is committed to working closely with the business rescue practitioners to ensure a successful outcome to the restructuring of the company that protects those associated with Tongaat.”
What this means – Business rescue and not liquidation
While the Company has interest from both existing shareholders and potential new equity investors to support the recapitalisation and retain our existing operating footprint, no-one has been able to provide the total funds required within the time needed to do so.
The South African lender group has remained supportive of the Company and has worked constructively with management since 2019. To assist with the c.R1.5 billion liquidity shortfall, the lenders advanced a new borrowing base facility of R600 million on 29 July 2022, which was due for repayment on 25 October 2022. Unfortunately, the lenders informed Tongaat they were unable to further extend the repayment date for the borrowing base facility.
Without this funding, the Board determined that Tongaat is, or would be, facing “financial distress” as defined by the Companies Act. The Board therefore agreed that the most responsible step was to place the company into business rescue.
Business rescue – Next steps
Within ten days of the appointment of the business rescue practitioners, they will host the first meetings of employee representatives and creditors.
|
Business Rescue – Key Facts
|
Tongaat Hulett’s Botswana, Mozambique and Zimbabwe sugar operations are not financially distressed and therefore will continue trading in the ordinary course. These three businesses are funded independently from the Company and should be largely unaffected by the adverse circumstances affecting the Company.
Tongaat Hulett’s shares will remain suspended on the JSE.
The sworn affidavit that was submitted to the CIPC to support the commencement of business rescue proceedings is available at:
https://www.tongaat.com/wp-content/uploads/2022/10/THL-Sworn-Statement_BR-Execution7755968.1.pdf
ENDS
FOR MEDIA ENQUIRIES:
Fletcher Advisory
Daniel Thole
Chris Steel
TONGAAT HULETT BOARD APPROVES CAPITAL RESTRUCTURING
Tongaat Hulett (“Tongaat” or “the Company”) today announced that the critical next step in delivering the comprehensive restructuring strategy to reduce its excess debt to sustainable levels and ensure the sustainability of the group has been completed. The Board has approved the capital restructuring plan created by the Chief Restructuring Officer (CRO) and Restructuring Committee and it will be submitted to stakeholders whose participation is required in relation to various elements of the plan, for their consideration imminently.
The near collapse of Tongaat Hulett under high debt levels, financial misstatements and historic mismanagement resulted in the loss of significant value to its shareholders. Since 2019, the Group embarked on a comprehensive turnaround strategy, guided by a new management team and new board of directors, with a focus on financial controls, oversight, asset care and protection and our people and the communities they support.
Over the past four years, debt has reduced by more than R6 billion from a high of R11.7 billion through the selected sale of assets and various cost and liquidity management actions. Despite this progress, delays experienced in the recapitalisation of the Company, particularly the failed planned equity capital raise, have seen high debt levels remain well in excess of what can be serviced by the Company. Consequently, further initiatives are urgently required to address the excess debt burden in the South Africa operation of more than R6.3 billion.
The restructuring plan, which was developed by the recently appointed CRO with the support of the Restructuring Committee, seeks to address how this excess debt can be repaid in a manner that recognises the South African lenders’ secured position while accommodating other stakeholders’ requirements to the fullest extent possible. The sustainability of our businesses, employees and value change are front and centre of the plan.
The plan also addresses the Company’s liquidity constraints after a R1.5 billion shortfall in facilities necessary to cover the peak working capital requirement of the current milling season, and which arose out of the challenging commercial environment experienced towards the end of March 2022, the lack of any meaningful dividend or fee income from the African sugar operations and higher restructuring costs. Despite these and other setbacks, the lenders have continued to support the Company with the introduction of a new R600 million facility which is scheduled to be repaid on 25 October 2022.
Critical point reached to realise restructuring benefits
After almost four years of following the comprehensive turnaround strategy, the company is seeing the first green shoots of recovery.
Tongaat has delivered an improved milling and sugar production performance, relative to previous seasons, and it is also experiencing strong local demand in its sugar businesses. The Mozambique sugar operations delivered excellent results.
Critically, the restructuring plan contemplates an extension and an increase in the Company’s commercial debt facilities to allow it to conclude the milling season and allow sufficient time to implement the Restructuring Plan. The Company is engaged in ongoing negotiations to determine the availability of such facilities.
The green shoots of recovery and the significant progress in delivering the turnaround strategy have been achieved despite the headwinds from unprecedented events outside of management control which included Covid 19, the civil unrest in July last year and flooding earlier this year in KZN. These events, and the delays experienced in the recapitalisation of the Company have contributed to further increasing the debt burden. Despite these setbacks, the lenders have remained supportive.
Gavin Hudson, CEO of Tongaat Hulett said: “The Board and management team continues to act with speed, determination and the highest standards of governance to secure the future of Tongaat Hulett. Securing funding will be key to our ability to continue operating into the next milling season and ensuring that Tongaat Hulett is able to continue to support the local sugar industry with critical milling capacity. Over 500 000 dependents and community members across SADC rely on Tongaat Hulett for their livelihood. Since the new management team and Board were appointed three and a half years ago, we have shared a singular focus – to fight for the future of this great company. Our strategy has focused on delivering a plan to make Tongaat sustainable and allowing it to maintain its socio-economic contributions. Tongaat Hulett plays a systemic role in the food security of the region and the economy of South Africa. For every job created by Tongaat Hulett South Africa, 10 jobs are supported elsewhere in the economy.”
PROGRESS WITH CAPITAL RESTRUCTURING PROCESS AND CHANGE TO THE AUDIT AND COMPLIANCE COMMITTEE
Tongaat Hulett today provided shareholders with an update on its capital restructuring process and a new appointment to its Audit and Compliance Committee.
Tongaat advised shareholders that efforts continue to submit a capital restructuring plan to reduce the Company’s excess debt and ensure its longer-term sustainability. This aims at dealing with excess debt in South Africa, currently estimated to be around R6.3 billion. The submission of the restructuring plan, driven by the Chief Restructuring Officer and the Restructuring Committee, has been extended to 14 October 2022 from 30 September 2022.
The board of directors of Tongaat also announced the appointment of Ms Louisa Stephens as acting chair of the Audit and Compliance Committee with effect from 1 October 2022, following the resignation of Ms Linda de Beer from the Board with effect from 30 September 2022 due to increasing demands on her time in her role as chair of the Public Oversight Board, based in Spain.
Ms Stephens is a BCom Accounting (Honours), BBus Sc, CA (SA) holder and Chartered Director (SA) and was appointed to the Tongaat Hulett Board on 15 July 2020. She is an independent financial trader and independent non-executive director of Multichoice Group, Royal Bafokeng Platinum and the Institute of Directors in South Africa. The Board looks forward to her contribution as chair of the Audit and Compliance committee and thanks Ms de Beer for her role in this regard. The Board is in the process of identifying a suitable replacement and shareholders will be advised as soon as such an appointment has been made.
Gavin Hudson, CEO of Tongaat Hulett said: “The board and management team continue to progress the turnaround and restructuring plan. The final restructuring plan will be based on work to assess a wide array of options for the optimal future of the business. It’s important to note that no final decisions have been made at this time.”
TONGAAT HULETT PROPERTY, FUNDAMENTUM AND THE ETHEKWINI MUNICIPALITY PARTNER TO UNLOCK SHONGWENI’S POTENTIAL
A new catalytic project in Durban’s outer west region deploys innovative thinking that combines the efforts of the public and private sector to create long-term value for all stakeholders.
The Shongweni Urban Core transaction, between local development company Fundamentum Property Group and Tongaat Hulett, with strong support of the eThekwini Municipality, will see a multi-phased development of Shongweni’s Urban Core, the new city of Westown.
This trigger phase of the Shongweni Urban Development, Westown, is a mixed-use precinct of urban and green spaces centred around the new retailing hub of Westown Square. This will be followed by a variety of other uses including residential, logistics, recreational, warehousing and leisure components.
Tongaat Hulett will benefit from sustained value creation over time, boosting the Company’s strategy of evolving from outright property sales to earning annuity income from its property portfolio. The nature of the transaction is a 99-year lease, an approach similar to the Waterfall development in Gauteng. This approach allows Tongaat Hulett to retain ownership of the land, and be entitled to annuity income from the residential, commercial and mixed-use properties.
As the landowner, Tongaat Hulett, in partnership with Fundamentum as the Westown developer, is responsible for the Shongweni Urban Development’s overall development vision and framework plan that aligns with public sector policy, plans and objectives. This vision extends to creating compelling and tailored real estate solutions for developers, investors, local community participants, future residents and end users within the Shongweni Urban Development.
With the conclusion of this first alternative and innovative transaction, Fundamentum will oversee and manage all aspects of the development of Westown as it is developed over multiple phases and years.
Westown is the focus of this transaction, with current development rights for 517 000 bulk square metres. The retail offering of Westown Square see the first phase of 45 000m² of development rights taken up alongside a new 100-bed private hospital. This will be closely followed by commercial/business and residential developments within Westown.
Key to unlocking the development of Westown is a required infrastructure investment of circa R730million over the next 3years with the eThekwini Municipality committing to supporting this Catalytic Project with an initial R595 million.
The 99-year lease mechanism will, over time, deliver value in excess of the land value whilst retaining the asset of the land. The commitment by eThekwini and Fundamentum for infrastructure development removes a large obligation for the Group, both from a cash flow and a resource point of view. In addition, the development of Westown will have significant benefit for the balance of the 2 000ha Shongweni Urban Development, and will act as a catalyst for the further development of industrial, lifestyle residential and other uses.
Mtura Matshini, Tongaat Property Development Executive said: “The Shongweni Urban Development project represents an innovative partnership between local government and the private sector. In overcoming the current challenging economic environment, the partners have produced a solution which transforms a key part of the Tongaat property portfolio into an annuity generating asset. In harnessing our expertise in development, the entrepreneurial agility of Fundamentum, and the support on infrastructure from the eThekwini Municipality, the project will act as a catalyst to benefit the people of Shongweni for years to come.”
For more information, contact: Mtura Matshini @ mtura.matshini@tongaat.com
TONGAAT HULETT SHARES SUSPENDED FROM TRADING
The JSE today notified Tongaat Hulett of its decision to suspend trading in the Company’s shares.
On 15 July 2022, Tongaat advised shareholders that it had voluntarily approached the JSE and requested a temporary suspension of the Company’s shares due to delays in the publication of the Provisional 2022 Financial Statements and the Audited 2022 Financial Statements.
The JSE declined the request to voluntarily suspend the share. They advised that the basis for suspending trade would be non-compliance with sections 3.16 and 3.17 of the Requirements in respect of the timeous publication and dissemination of provisional results. The JSE also cited Tongaat’s confirmation that it cannot comply with sections 3.19 and 3.23 of the Requirements, as the Company will not publish its annual integrated report by the due date of 30 July 2022.
The suspension has no material impact on the company’s financial stability or its business operations.
The Company expects trading in its shares to be reinstated once financial results are published.
