Niks, nothing, nada – Tongaat Hulett’s investors told they are last in a very long line
The sugar producer’s business rescue plan is set to be published at the end of next month, but the business rescue practitioners, staff and banks must be paid first.
If Tongaat Hulett investors were still under any illusions that they might receive a payout for their shares in the troubled sugar producer, their hopes were dashed as business rescue practitioners informed them that the kitty was empty.
At best, unsecured creditors – all creditors with concurrent claims against the company are collectively owed just under R1.7-billion – might be able to receive a nominal payout, which is estimated at about 5c to the rand. This comes after an earlier rescue plan, dated 31 May, noted that unsecured creditors would be unlikely to receive any recovery relating to their claims if Tongaat Hulett went into liquidation.
The SA Sugar Association – still owed R757-million – is one of legions of unsecured creditors, which include the South African Revenue Service, the Department of Water and various retailers.
Secured creditors, who hold 74% of the vote, are owed R7.314-billion; Standard Bank, the bank with the most exposure, is owed about R1.93-billion, followed by Nedbank (R1.5-billion), RMB/FNB (R1.2-billion) and ABSA (R1.14-billion), which collectively have 58% of the vote. The Industrial Development Corporation is still owed R613-million, which it “generously provided”, said the business rescue practitioners, ahead of the deadline for its business rescue plan, to help the group complete the milling season, off-crop maintenance and capital expenditure.
In a virtual shareholder engagement on Tuesday, Metis Strategic Advisors told shareholders numerous times that they would be unable to realise any value for their investments.
They said that because of events before the business rescue process got under way, the social imperative to save an economic catastrophe in KwaZulu-Natal, the extent of the balance sheet shortfall, the composition of the assets, the extent of creditors, the need to raise significant new post-commencement finance (PCF, or working capital), and the rights of secured creditors, Tongaat Hulett’s debt was far in excess of realisable value of assets, so shareholders would be unable to realise any value for their investments.
The business rescue practitioners – Trevor Murgatroyd, Peter van den Steen and Gerhard Albertyn – said the amended business rescue plan is expected to be published before 31 October 2023.
Only the creditors, who vote on the business rescue plan, will have the final say.
If the creditors vote on that plan, it will finally be adopted.
Tongaat Hulett was placed in voluntary business rescue in October 2022 to avoid bankruptcy in the aftermath of massive fraud discovered in 2018.
In accordance with company law and insolvency law, investors are at the bottom of the food chain in business rescue: first the business rescue practitioners are paid, then the employees, followed by creditors, unsecured PCF creditors, preferent employees, unsecured creditors and then shareholders.
The business rescue practitioners said that while they are working towards a plan focused on saving jobs and optimising returns to stakeholders, business rescue is not “business as usual”: the company is in financial distress. The market knows it and is treating it as such, with “dozens of speculative, opportunistic and unfunded proposals”.
On 23 July, the business rescue practitioners announced they had a preferred bidder for Tongaat Hulett – Kagera Sugar Limited, which is owned by the Super Group in Tanzania. Backed by Norfund (Norwegian Investment Fund for Developing Countries), the sugar producer has interests in Oman, Democratic Republic of Congo and Bahrain.
If creditors approve the sale, Kagera will assume the IDC facility and all working capital-related items. DM