The fate of troubled sugar refiner Tongaat Hulett (THL) will be revealed by its business rescue practitioners (BRP) in June with eight potential strategic equity partners (SEPs) interested in the acquisition of, or investment in the business, or parts of its SA Sugar businesses.
The sugar sector will anxiously await the outcome as the sugar sector, with cane growers, mills and supply chains, supports thousands of jobs in KwaZulu-Natal.
The sugar and property group, with a legacy of 130 years under its belt, was implicated in an accounting scandal in 2019 and, despite being put under new management with a turnaround plan, was forced to enter business rescue after a potential rights offer or funding plan hit the wall.
Trevor Murgatroyd, Peter van den Steen and Gerhard Albertyn of Metis Strategic Advisors were appointed the business rescue practitioners of Tongaat last year.
In a business rescue update yesterday, the BRP said: “Whilst a substantial number of potential SEPs were initially considered, this has been narrowed down to eight potential SEPs. They are well advanced in their due diligence processes, which are expected to conclude around the end of May 2023. Final offers are expected to be received during June 2023.”
In February the BRPs started engagements with potential SEPs.
There were various corporate restructuring outcomes on the table.
The BRPs said one or more SEPs – either with or without participation by Industrial Development Corporation – may acquire all of THL’s sugar assets and businesses with the exclusion of certain liabilities; acquire only the core SA Sugar businesses, leaving the African assets to be disposed of separately acquire specific assets or businesses; or a combination or permutation of the above.
It said if there were any unsold or excluded assets, the BRPs would seek purchasers through controlled, accelerated sale processes.
Selected SEPs were required to demonstrate the following criteria such as an interest in THL as a whole or in SA Sugar technical expertise and operational ability; balance sheet strength; substantial access to funding and a plausible business case being presented for the future of the THL or SA Sugar business and a valuation of the relevant assets that demonstrated a likely ability to conclude a transaction.
Creditors would vote on the business rescue plans on June 14, it said.
The BRPs said: “A constant factor in our minds in the execution of this business rescue is the enormous social impact of the businesses under our care.
“It is beyond question that the successful rescue of especially THL’s sugar operations in South Africa will save tens of thousands, possibly hundreds of thousands, of direct and indirect jobs. We take this responsibility very seriously and are confident that Tongaat Hulett has a future.“
It said they had made significant progress towards securing a potential strategic equity partner with a view to developing a long-term sustainable business solution.
“We are also grateful to have been able to stay up to date with grower, unsecured creditor and employee payments. We thank the lender group and the IDC for their support,” it said.
The BRPs added that the IDC, the lender group, held security over all material assets of THL, except the cash balances, stock and debtors, which the lender group released to the IDC for security.
However, the BRPs addressed concerns of the non-payment to unsecured creditors.
“As part of the business rescue plan, we have agreed with the lender group that they will share 15% of their proceeds from the sale of the SA Sugar businesses and/or assets with unsecured creditors.
“This contribution will be set at a minimum of R45 million and a maximum of R90m. This will ensure a benefit uplift to unsecured creditors relative to the anticipated liquidation dividend of zero if the company were to be placed in liquidation,” it said..
The proceeds would be distributed to unsecured creditors pro-rata to their claims.
BUSINESS REPORT