Tongaat Hulett shareholder meeting raises questions on business rescue process

The Mozambique-based RGS Consortium says it has a new offer for Tongaat Hulett (THL), but Vision Investments (VI), which were appointed by the business rescue partners, say a yes vote by shareholders at tomorrow’s (Thursday) meeting will bring the beleaguered sugar group a step closer to a “substantially better future”.

But this view is not shared by all, with for instance, agricultural economist Dr Kobus Laubscher saying yesterday that contrary to claims that shareholders will be left with nothing if they vote against Vision’s debt-for-equity swap at the meeting, “the reality is far more complex”. Laubscher claims VI had so far failed to come up with the required funds for the deal.

“Similarly, assertions that the Vision business rescue plan must be implemented because creditors voted to adopt it, and that Vision already owns THL’s assets (including those in South Africa, Mozambique, and Zimbabwe) are plainly incorrect,” said Laubscher.

Vision Investments said in a statement that to date, it had complied with all the terms of the banks or secured creditors in THL’s business rescue proceedings, who were owed more than R7 billion.

“The banks have been very supportive and facilitated Vision to save THL from liquidation by accepting the Vision offer to acquire all the banks’ debt in THL. The agreement between the banks and Vision is final and irreversible,” VI said.

To strengthen THL’s balance sheet, VI had proposed a debt to equity swap, whereby R5bn of the R8.6bn debt currently owing would be swapped for fresh equity being issued by THL to Vision. A residual R3.6bn of debt still owing to Vision would be held as subordinated long-term debt in THL.

“It appears there is a misguided or deliberate view that if the Vision plan is seen to have failed, then RGS will get another chance to bid for THL. This RGS media and legal agenda is baseless, vexatious and sensational with the sole purpose to create doubt and controversy while knowing very well that the Vision acquisition of THL as approved by creditors in January, 2024 is irreversible and steaming ahead,” VI said in its statement.

It said VI had no plans to dispose of any THL assets, and the unsecured creditors would be paid R75 million by VI. “That amount is securely in a bank account and will be escrowed shortly for distribution to the unsecured creditors. This is a significant gesture from Vision to support the unsecured creditors, some of whom will continue to be long-term suppliers of products and services to THL,” the statement said.

Laubscher said, however, Vision had repeatedly failed to raise the full funds necessary. In 2023, a previous acquisition agreement between Vision and the lenders was leaked during court proceedings related to THL’s obligations to the South African Sugar Association (SASA). This agreement required VI to pay the purchase price by December 6, 2023 failing which the agreement would terminate.

“VI’s failure to meet this deadline was confirmed during a court hearing on December 7, 2023. Despite this, the BRPs continued to push ahead with the flawed Vision plan,” Laubscher said.

“It appears Vision has not subsequently raised the necessary money. A circular from the BRPs regarding the conversion vote indicates that Vision has acquired only the R4.9bn portion of the lenders’ claims. The remaining R3.6bn debt remains with the lenders, leaving THL facing financing costs of R448m per year,” he said.

“This raises questions about why Vision has not acquired all the lenders’ claims as promised, and what effect this failure will have on its plan. Without an explanation, the unavoidable inference is that Vision has again failed to raise the full funds,” said Laubscher.

RGS’s new bid involves injecting R4.45bn into THL to acquire 90% of its shares, with R4bn to be paid to senior secured lenders, the settlement of sugar industry levies owing to the SASA, payment of the first R75 000 of outstanding unsecured creditors claims, and 65 cents in the rand of unsecured creditor claims, with the balance to be repaid over five years.

RGS had pulled out of its initial bid after ToNgaat’s business rescue practitioners and its lenders found that a R2bn proof of funds document from Absa Mozambique on behalf of RGS was allegedly fake.