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Tongaat Hulett creditors voted almost unanimously in favour of the rescue plan for the company’s property arm, which is to be wound down.
With 92% of creditors voting, 99.8% voted in favour, the business rescue practitioners said. The plan required at least 75% support of those voting, with secured creditors, in aggregate, expected to receive distributions of around 7c to the rand – though the practitioners had said this is compared to 2.5c forecast if the company went into liquidation.
Significant lenders claims
Tongaat’s lenders had claims totalling R7.7 billion against Tongaat Hulett Developments, which managed and developed Tongaat’s property interests. The property arm has provided guarantees for group level debt since 2007, meaning it is liable for Tongaat’s debt as a whole.
The sugar group had entered into business rescue in October and the property arm is just the first part of the business to publish its plan, which entails a structured wind down of the company, its operations and the sale of its property assets.
In March, creditors had also approved an extension of the publication of Tongaat’s business rescue plan – including for its SA sugar operation and feeds division – until the end of May.
Partial sale over fire sale
Meanwhile, the South African Canegrowers Association (SA Canegrowers) said it would back the sale or partial sale of Tongaat Hulett Limited (THL) rather than a fire sale of assets as the best way forward with 1 million sugar sector livelihoods hanging in the balance.
This after the Joint Rescue Business Rescue Practitioners (BRP) released a business rescue plan on Wednesday, which said eight potential strategic equity partners were interested in the acquisition of, or investment in the business, or parts of its SA Sugar businesses.
However, the BRP said if there were any unsold or excluded assets, the BRPs would seek purchasers through controlled, accelerated sale processes.
Final offers were expected to be received during this month and creditors would vote on the business rescue plans on June 14, it said.
Thomas Funke, the CEO of SA Canegrowers, said, “Essentially, all that the plan has announced is that there are conditionalities at play, and certain events are still taking place. That means the 1 million livelihoods dependent on the sugar industry remain at grave risk.”
Image By: South African Canegrowers Association
Pros and cons
SA Canegrowers gave commentary on the pros and cons of the two potential plans that the business rescue document set out.
It said in the first plan, which it understood was the preferred option for THL, assets would be sold to new owners, in part or in full, and the business would continue operating. There were eight interested parties and that binding offers were due on June 15.
“This is the least disruptive avenue, and one which SA Canegrowers would support, provided certain fundamentals are in place to safeguard the ongoing sustainability of the role that THL plays in both the sugar industry and, in turn, the broader KwaZulu-Natal economy,” said Funke.
He said the second plan was a far riskier one. Much would depend on whether an eligible buyer could be found.
“It would seem that if no appropriate buyer is found, the assets will be sold in a fire sale. This puts the entire sugar value chain at risk, and the 1 million livelihoods dependent on it across the country. Because, if the sugar business of THL is not sold as a unit, the entire structure of the industry, that has been in a delicate functioning balance for over 100 years, would be destroyed,” said Funke.
SA Canegrowers said it looked forward to the detail of the business rescue plan as soon as possible, so that it could continue its role in positively contributing to jobs, food security and economic stability, especially in the deep rural areas of KwaZulu-Natal and Mpumalanga.
