Tongaat Hulett business rescue practitioners dump Kagera, submit new preferred bidders
The business rescue practitioners say the proposal by Kagera – an unknown company from Tanzania – cannot be considered, but they have two more solid bidders in the bag. They’ll need to move quickly, though, because they have also just lost in court and will be held liable for R1.5bn in levies to the SA Sugar Association.
Tongaat Hulett Limited’s (THL’s) business rescue practitioners, Metis Strategic Advisors, have released a new rescue plan, proposing to sell the business to new buyers after dumping the preferred bidder — a little-known company based in Tanzania – which they had settled on towards the end of July.
Kagera Sugar Limited, which is owned by the Super Group in Tanzania and backed by Norfund (Norwegian Investment Fund for Developing Countries), has interests in Oman, Democratic Republic of Congo and Bahrain.
Kagera does not have a website or a LinkedIn profile.
Norfund’s website says Kagera is the third-largest sugar producer in the country and is involved in growing sugar cane, processing and distribution of sugar.
On 23 July, the business rescue practitioners said that when they started the business rescue process, more than 70 parties were interested in acquiring Tongaat. That list was narrowed down to eight and, “after a rigorous process”, Kagera Sugar emerged as the preferred candidate because it was deemed to be financially sound, with a good track record.
But by October, after securing extensions from creditors on publication of the rescue plans and the release of the 2022 results, the business rescue practitioners said they needed more time to conclude relevant transaction(s) and to include these in the plans. They also referred to court proceedings relating to THL’s payment obligations to the South African Sugar Association (Sasa).
On Wednesday, SA Canegrowers issued a statement welcoming the Durban High Court’s order dismissing THL and the business rescue practitioners’ application to challenge the financial obligations of the miller in terms of the Sugar Act and the Sugar Industry Agreement.
The order, which will be handed down on Monday, follows the failure of both Tongaat Hulett and Gledhow mills to pay more than R1.5-billion due to Sasa at the end of March 2023.
SA Canegrowers said because of these defaults, the final recoverable value price which growers receive for processed sugarcane in the 2022/23 season had dropped by more than R400 per tonne, with significant financial implications for growers and compromising the sustainability of their business.
The business rescue practitioners had argued that they were exempt from paying Sasa’s levies because the business rescue process took precedence over the industry arrangements.
Had Tongaat Hulett won in court, the sugar industry would have been fundamentally undermined, said the association.
Both the business rescue practitioners and SA Canegrowers said they will study the judgment, which will be handed down on Monday, 4 December.
Sasa said they look forward to future engagements with the business rescue practitioners to resolve this matter and secure the outstanding funding that is now critically due to Sasa, growers and the other millers, in order to help ensure the industry’s long-term survival and protect the livelihoods it supports.
On Thursday, the business rescue practitioners published updated business rescue plans for THL and its subsidiaries, Voermol Feeds and Tongaat Hulett Sugar SA.
They said while Kagera Sugar was announced as the selected strategic equity partner, its proposal cannot be considered at this time for “various reasons”, including a requirement in their proposal for exclusivity.
The business rescue practitioners have now published two business rescue plans that outline two separate proposals by entities/groupings referred to as RGS (a Mozambique conglomerate) and the Vision Parties (Terris Sugar, Guma, Remoggo and Almoiz), which is owned by South African businessman Robert Gumede, the founder of the Gijima Group.
RGS is owned by the Gulamo family in Mozambique. It recently expanded into Angola and has operations spanning multiple industries, including edible oils, hygiene, sugar, cereal and mining.
In a statement issued on Thursday, the business rescue practitioners said they have consistently stated that business rescue is a creditor-driven process and that they are there to develop, facilitate and implement a plan which balances the interests of all stakeholders.
“In this context, we presented two amended business rescue plans today for creditors’ consideration. We are confident that we are presenting fair and balanced business rescue plans under challenging circumstances.
“Importantly, we want to highlight that these amended business rescue plans are substantially improved from those put forward by the bidders during the SEP process. This will result in improved outcomes for a variety of Affected Persons, particularly creditors and potentially shareholders.”
Creditors have been invited to a pre-meeting proxy vote to determine the order in which the two plans will be considered at the formal meeting of creditors taking place on 8 December 2023. At this meeting, if the first plan voted on is not approved by enough creditors, the second plan will be presented and voted on by creditors.
They said the RGS and Vision business rescue plans are similar in that:
- A purchase by RGS/Vision of secured claims and security entitlements;
- The future conversion of those secured claims into equity, thereby substantially improving the solvency of THL;
- An enhanced unsecured creditor distribution compared to a zero-cents-in-the-rand expected liquidation outcome;
- The continued listing of THL on the JSE with existing shareholders remaining invested in the company, although with a diluted shareholding (instead of a nil entitlement, should the company be liquidated, or assets sold off.) DM