Financially troubled JSE-listed sugar producer and property firm Tongaat Hulett says it’s making progress with its debt restructuring and has concluded a brand new R600 million borrowing base facility with the South African lender group.
The firm stated on Thursday that negotiations are additionally progressing with funders outdoors of the lending group to safe an additional R750 million.
Tongaat CEO Gavin Hudson stated the corporate continues to progress the turnaround and restructuring plan that can be delivered to the board on the finish of this month.
“We have also addressed the group’s short-term liquidity needs and are working to extend the borrowing base facility as a matter of urgency,” he stated.
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The present restructuring plan is being developed by the corporate’s chief restructuring officer with the help of the restructuring committee and is geared toward dealing with extra debt within the South Africa operations, which is presently estimated at about R6.3 billion.
Although the brand new borrowing base facility will solely stay in place till 30 September 2022, the corporate stated an choice to upsize the power, which is topic to credit score approvals, is being negotiated.
It stated the South African lender group has additionally not enforced the contractually agreed rate of interest margin will increase thus far, including the intention is for the borrowing base facility by the lenders to be elevated from R600 million to R750 million and prolonged to the top of the 2023 monetary yr.
However, it stated that is depending on the mutual settlement of the board’s restructuring plan.
If each engagements are profitable, the whole liquidity necessities of the South African operations can be met for the 2023 monetary yr, it stated.
“It is anticipated that these two liquidity services can be repaid from carry-over proceeds obtained from the SASA [SA Sugar Association] on the finish of the season.
Numerous initiatives
“In parallel, management continues to progress numerous initiatives to improve cash flows and liquidity headroom,” it stated.
The firm stated an preliminary restructuring plan was introduced to its board and lenders on the finish of July and a draft plan was submitted to lenders on 31 August.
“As a part of the circumstances of the borrowing base facility, a board-approved plan is to be out there by 23 September 2022.
“This aims at dealing with excess debt in South Africa, currently estimated to be around R6.3 billion,” it stated.
Options presently being explored by the corporate embody an fairness capital injection by strategic companions at varied ranges inside the group, the disposal of some or all the African operations, or a mixture of those choices.
Tongaat careworn that when assessing the disposal of the African operations, a key consideration is the power of the South African operations to function as a listed entity on a standalone foundation, and the power to fund the required reinvestment to be sustainable long run.
In a buying and selling replace for the yr to end-March 2022 launched with the debt restructuring replace, Tongaat reported that the money flows from the South African operations skilled important strain through the 2022 monetary yr on the again of disruptions within the sugar and property operations, decrease than anticipated dividend and charge earnings obtained from Zimbabwe, and no dividend or charge earnings obtained from Mozambique as a result of restrictions on intergroup funds as contained within the in-country debt agreements.
Tongaat stated the group’s South African sugar operations reported an working money outflow for the yr of about R500 million because of the have to reinvest within the milling belongings and opposed working capital actions.
In addition, the corporate stated the quantity as a result of be refunded to SASA for the refinery loss was finalised and the quantity settled over the course of the season by the business’s redistribution mechanism.
Tongaat stated finance prices settled in money by the South African operations positioned additional pressure on liquidity in direction of the top of the yr, with these challenges rising the general internet debt of the South African operations by R800 million to R6.6 billion.
It stated R5.4 billion of the whole R6.6 billion is owed to the South African lenders, with the stability relating principally to commerce finance supplied by SASA.
Tongaat stated the group’s complete internet debt, together with Mozambique and Zimbabwe, elevated 15% to R7.6 billion from R6.6 billion.
Hudson stated regardless of the flooding in KwaZulu-Natal and rain-induced decrease sucrose ranges, it’s pleasing to notice that the South African sugar mills are performing nicely forward of the prior yr and have benefitted from the numerous efforts invested within the off-crop upkeep programme.
“Both sugar and animal feed merchandise are delivering a powerful industrial efficiency.
“In Mozambique, the season start-up was additionally affected by heavy rainfall however the sugar mills are steadily catching up on this misplaced milling capability and the enterprise continues to carry out favourably.
“Macroeconomic conditions within Zimbabwe remain challenging and unpredictable with the introduction of several measures to curtail inflation,” he stated.
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Tongaat anticipates reporting a headline loss per share of between 676 cents and 632 cents within the yr to end-March 2022 in contrast with end-March 2021 restated headline loss per share of 440 cents.
Shares in Tongaat closed unchanged on Thursday at R4.04.
