CHANGES TO THE BOARD AND BOARD COMMITTEES AND APPOINTMENT OF A CHIEF RESTRUCTURING OFFICER AND TERMINATION OF MAGISTER AGREEMENT
25 June 2022
Tongaat Hulett has announced the establishment of a Restructuring Committee, an additional sub-committee of the board of directors of the Company.
The establishment of the Restructuring Committee and the appointment of the Chief Restructuring Officer are to intensify the focus on the turnaround of the Company, due to the delay in implementing the rights offer.
The primary responsibility of the Chief Restructuring Officer and the restructuring committee will be to further focus on developing solutions to reduce and repay debt to sustainable levels whilst improving the liquidity of the Company.
Piers Marsden has been appointed by the board as the Chief Restructuring Officer and a non-executive director of Tongaat Hulett. Piers is a specialist in improving corporate performance, executing corporate turnarounds, and restructuring corporate debt. He has previously acted on behalf of Cell C, Ascendis Health, Edcon, Highveld Steel & Vanadium and Optimum Coal amongst others. His focus areas have been in restructuring debt, recapitalising the companies, and implementing restructuring plans to deliver long-term sustainable growth and future value to all stakeholders.
This appointment will also provide Tongaat Hulett’s executives with additional capacity to focus on strategic progress, operational issues, and the day-to-day demands of managing the Group to deliver future value to all stakeholders.
Termination of Magister Transaction
On 16 November 2021, Tongaat Hulett entered into an Underwriting, Subscription and Relationship Agreement with Magister Investments Limited in relation to a potential equity capital raise (Underwriting Agreement).
A. The Underwriting Agreement was entered into subject to the fulfilment of certain conditions precedent (Conditions Precedent) on or prior to 30 June 2022.
B. Progress has been slowed by regulatory processes including a hearing required by certain shareholders before the Takeover Special Committee and longer than expected timelines in obtaining the approval of the Zimbabwean Competition and Tariff Commission.
C. As a result, these Conditions Precedent have not yet been fulfilled, and Tongaat Hulett and Magister do not anticipate that those Conditions Precedent will be fulfilled on or prior to 30 June 2022.
In order to avoid further regulatory delays, Tongaat Hulett and Magister have accordingly agreed to terminate the Underwriting Agreement. The agreement contemplated in the Magister Transaction, and in the circular to shareholders dated 15 December 2021 will accordingly not be implemented.
“Today, we have taken some very important steps to secure the future of this company in the light of the Magister development and as the delay in the rights offer requires us to bring in extra resources to further accelerate our restructuring plans,” said Gavin Hudson, CEO of Tongaat Hulett.
The lender group remains supportive of Tongaat Hulett and the Company is currently engaging with them and other parties to provide liquidity which will provide us with additional time as we work to progress a comprehensive restructuring solution. The CRO we have appointed has a strong track record in turning around and restructuring companies for sustainable growth and we have a clear intent to move forward.” Hudson continued.
“The accounting scandal that almost destroyed Tongaat Hulett has placed it in the situation it is in today and I am pleased to have been appointed to focus on helping save this national icon and play a part to returning it to a sustainable footing,” said Piers Marsden, Chief Restructuring Officer and a non-executive director of Tongaat Hulett. “A significant amount of work has been done by the Board and the Executive over the past few months. The intent is to produce a plan quickly that considers all available options and provides clarity to stakeholders for the way forward.”
As stated previously, Tongaat Hulett remains committed to a recapitalisation. The Company is continuing to proactively engage with stakeholders regarding a capital raise transaction and a sustainable solution for the group. There is a positive commitment from various stakeholders who recognise the critical social impact Tongaat Hulett has in South Africa and across the SADC region.
Tongaat remains firmly of the view that a capital raise is a better alternative to strategic asset disposals, particularly an accelerated disposal programme which is unlikely to realise full value for the assets.
Shareholders will be updated on further developments as and when they arise.