Financially troubled sugar producer Tongaat Hulett on Thursday introduced that will probably be coming into a voluntary business rescue course of (BRP), after its board discovered the corporate to be in “financial distress”.
In a Sens assertion the JSE-listed firm – which is presently suspended from buying and selling attributable to a delay in publishing its newest financials – stated that its debt ranges are nicely in extra of what it may service after business recapitalisation plans took longer than anticipated.
The group’s property division – Tongaat Hulett Developments (THD) – can even bear the BRP as it’s depending on the corporate for funding.
However, in response to the group, its Botswana, Mozambique and Zimbabwe sugar operations will probably be exempt from the rescue course of as they continue to be financially sound and will not be reliant on Tongaat for funding.
The Tongaat board has appointed Trevor Murgatroyd, Peter van den Steen and Gerhard Albertyn of Metis Strategic Advisors because the business rescue practitioners of the corporate and THD.
“The business rescue practitioners will investigate the affairs of the group, consider the various options available and develop a business rescue plan for consideration by the company’s affected persons,” Tongaat stated.
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“The company lodged the requisite documents with the Companies and Intellectual Property Commission (CIPC) on 27 October 2022 and awaits confirmation of filing from the CIPC.”
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Not a liquidation
The group is adamant that the choice to enter a rescue course of doesn’t imply will probably be liquidated however moderately is a method to restore the companies well being, return worth to its shareholders and shield jobs, its collectors and stakeholders.
“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,” CEO Gavin Hudson stated in a press release.
“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.”
“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.”
Debt issues
The KwaZulu-Natal-headquartered firm has confronted a number of challenges over the previous couple of years, together with allegations of mismanagement, monetary misstatements and growing debt ranges.
Before the introduction of recent management in 2019, the group was battling debt as excessive as R11.7 billion. However, since implementing its turnaround technique below new administration, Tongaat says it was capable of scale back its debt ranges by greater than R6.6 billion, after promoting off a few of its non-core, and in some situations, core property.
Despite these efforts, the group says it’s nonetheless unable to service this leftover debt, a majority of which (87%) is carried by the cashflows of the South African sugar operations, the property business and dividends and operational help charges acquired from its non-South African sugar operations.
The Covid-19-pandemic, along with the July riots and devastating floods in KZN didn’t make it any simpler for the corporate to stage a profitable turnaround.
The group additional added that its restoration was additional hampered by the operational headwinds it skilled within the type of sugar loss at its refinery and poor milling efficiency attributable to historic poor plant upkeep.
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Restructuring plan
In September it appeared that the debt-laden firm was making good progress with addressing its liquidity constraints by means of its debt restructuring plan when it revealed to the market that it had secured a short-term R600 million borrowing base facility from a South African lender.
The facility was supposed to help in the direction of its R1.5 billion working capital shortfall.
However, with the ability due for reimbursement and Tongaat void of different funding options to help its restructuring plans, the transfer into BRP was seen as needed by the board.
It isn’t but clear what the anticipated timeframes for the rescue plan will probably be, nevertheless the group did observe that its shares will stay suspended on the JSE within the meantime.
Read:
Tongaat Hulett makes progress with its debt restructuring
Tongaat Hulett abandons deliberate R5bn rights supply
