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Not so sweet: Tongaat Hulett again delays debt talks, s...

Business Maverick

BUSINESS MAVERICK

Not so sweet: Tongaat Hulett again delays debt talks, share price falls

(Photo: Dean Hutton / Bloomberg via Getty Images)

Scandal-hit South African sugar producer Tongaat Hulett said on Thursday it was again postponing the target date to conclude a deal with lenders to settle more than R8-billion of debt, sending its stock price lower while raising concerns of a default by the 128-year-old cane grower.

The KwaZulu-Natal based sugar company Tongaat Hulett was fined R7.5-million last year by the JSE for misrepresenting its financial statements between 2011 and 2018, a scandal second only to the Steinhoff debacle in scale, and one that has cost more than 5,000 jobs and millions of rands for investors. 

Tongaat has been in negotiations with creditors since late 2019 and last year it sold its starch business to a subsidiary of Barloworld, using the R4.5-billion proceeds to pay some of its debt. While it managed to meet a 31 March deadline to repay at least R6-billion of its SA debt, it has failed to meet a milestone to sign cumulative debt reduction agreements amounting to R8.1-billion.

In a trading statement, the firm said the deadline had now been pushed back from 30 June to 13 July. 

“The quantum of the milestone remains unchanged and still requires THL to sign cumulative debt reduction agreements amounting to R8.1-billion. Negotiations with the lenders in terms of a debt refinance continue to be progressed and a further announcement will be made with the release of annual financial statements.”

Tongaat is looking to shave about a third of the debt it can commit to pay, down to around R6-billion. The firm, which also has operations in Zimbabwe and Mozambique, will likely raise the cash it needs through further sales of its land and property holdings, but some market-watchers are not ruling out a rights issue, which would be hard to swallow for investors who have seen the stock price plunge more than 90% in the past five years. The share price was down around 2% on the day.    

Tongaat said it expects to release its financial results for the financial year ended 31 March in the next two weeks. The numbers are likely to be grim. 

The company said headline earnings per share (heps) would likely be “substantially lower” due to the impact of Covid-19 and the hit its starch sales took under the alcohol bans and a 10% drop in local sugar production. 

The firm sees heps, the main profit measure in South Africa, falling by between R863-million and R839-million, or as much as 640 cents per share. BM/DM

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