The vote to sell Tongaat to the Vision consortium did not go ahead on Wednesday after the Industrial Development Corporation (IDC) demanded more security from the buyer, while a lawyer and banker questioned if the consortium had the money to buy the business.
Tongaat has been in business rescue for 14 months and the vote on a new owner must be finalised by January 15, failing which the IDC has threatened to demand repayment of its R2.3bn loan. This would force Tongaat into liquidation which would have a devastating effect on the rural KwaZulu-Natal economy.
The last-minute postponement of the vote was at the request of Standard Bank.
Vision was the only buyer left for creditors to vote for on Wednesday, but its requirements for ongoing funding from the IDC put it at odds with the government lender who wants its money back when the deal is finalised.
The Vision consortium, led by SA businessman Robert Gumede, includes Samancor Chrome owner Terris, Mauritian-based investment holding company Remoggo, and Almoiz Group, one of Pakistan’s largest agribusinesses.
Vision missed two deadlines to buy Tongaat’s R8bn debt from lenders in order to get its hands on the business in late 2023, even after it said it had clinched the deal.
Before Wednesday’s meeting was postponed the business rescue practitioners faced multiple questions, including from a banker who must vote on the deal, who questioned if Vision had the money to buy the business and if the money came from reputable sources.
He said: “For the collective benefit and understanding of all parties present, please could you provide us with some insights into the due diligence process undertaken to verify the sourcing and reliability of funding from the prospective buyers? Understanding these safeguards will greatly assist us in evaluating the viability and integrity of this rescue proposal.”
Lawyer Lionel Shawe, acting for Mozambican consumer goods firm RGS, the prospective buyer that pulled out on Tuesday, also asked about Vision’s funds. “What proof have the business rescue practitioners received that Vision has the funds to finalise the acquisition and when will the acquisition occur?”
Business rescue practitioner Trevor Murgatroyd said they had received a letter from Standard Bank confirming that Vision did have sufficient funding to implement the business rescue plan.
The plan sees Vision offering R4.1bn to lenders for the equity in business with more money to come in a debt-for-equity swap, but says nothing on how it will fund the day-to-day running of the business.
This led to concerns and questions raised by Tongaat shareholder Dave Woollam on whether the business can be run on a sustainable basis after business rescue. This question went unanswered as the meeting was not aimed at shareholders.
Shawe had similar reservations: “What work have the business rescue practitioners done to satisfy themselves that Tongaat will exit business rescue on a solvent basis?”
The practitioners said they believed there was a reasonable prospect of success that Tongaat could be saved.
Tongaat, which went into business rescue in October 2022, was on the “brink of collapse”, said attorney Haroon Laher, acting for the IDC, before the lender stepped in with the day-to-day funding that was needed.
While saying it supported the business and rural economy, the IDC made it clear it expected to be repaid when the deal closes in a few months and that it did not have the required security for the debt that rose from an initial R900m loan.
Laher said the funder requires additional security for its loan by January 26 or it could demand repayment in full.
“The agency reserves its right to demand the immediate repayment of the IDC facility and of course exercise its security,” he said, adding that taking a “a haircut” was not an option.
According to legal papers filed in recent court cases, Tongaat is in desperate need of working capital to keep running. However, Laher said the IDC is under no obligation to extend its loan beyond the end of February or to provide additional funding. However it would be open to negotiation.
Meanwhile Vision spokesperson Rob Bessinger said in the meeting the consortium had not yet had the conversation with the IDC about repayment times and wanted to convert the IDC loan to a “working capital facility”, which would be for a longer term.
It is not clear why the meeting to vote was postponed to Thursday afternoon and if it was to do with the IDC’s demand for additional security. Vision said it would not make comments to the media.
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