Tongaat Hulett’s turnaround faces yet another hurdle after losing bidder RGS Holdings filed an urgent high court application last week to block the sale of assets to the Vision consortium.
RGS alleges in papers filed with the high court in Durban the business rescue practitioners had neither acted in accordance with their duties and obligations nor in the interests of Tongaat and its stakeholders.
RGS argues the Vision consortium, which plans to buy the stricken sugar producer’s R8.5bn debt from lenders and convert most of it into equity, has failed to raise the necessary funds. Yet the BRPs continued to push ahead with the Vision plan, RGS claims.
RGS also claims the practitioners were in breach of the plan when they sought shareholder approval for the debt-to-equity conversion while the acquisition itself was incomplete. The conversion would have transferred 97.3% of the shares to Vision, leaving shareholders with just 2.7%.
RGS had also bid to take over Tongaat, publishing a separate business rescue plan that was later withdrawn. That offer involved R4.4bn being injected into Tongaat and the group retaining its JSE listing.
In January, creditors approved Vision’s plan to buy Tongaat’s R8.5bn debt, swap R4.9bn of the amount into equity and keep R3.6bn as debt.
RGS claims that the creditors approved business plan allows the conversion to proceed only once all lender group claims are settled.
Metis Strategic Advisors, the business rescue practitioners, said it would contest RGS’s application.
“This litigation is both time- and cost-consuming — which is not in the interests of any of the [Tongaat] stakeholders. The business rescue practitioners and their legal advisers are currently working through this latest urgent application and intend opposing same to the extent they are advised to do so,” it said in a statement.
“The lender group, Vision, the IDC [Industrial Development Corporation] and the business rescue practitioners remain committed to the implementation of the Vision sale of asset transaction as expeditiously as circumstances permit.”
RGS further noted that the adopted business plan had failed to be implemented within a reasonable time and had lapsed.
“It is clear from the information provided in the circular that the acquisition has not been completed by the Vision parties, who along with the business rescue practitioners have subsequently alleged that the remainder of the purchase price due to by the Vision parties by the lender group under the acquisition agreement is only due by December, 31,” the application reads.
RGS argues the alleged payment deadline is contrary to the information disclosed that the acquisition would have been completed by the time of the creditors’ meeting.
The group also called into question a letter from Standard Bank that confirmed Vision had sufficient funds to complete the transaction, and the business rescue practitioners’ conduct in assuring the creditor group.
Independent analyst and informal shareholder representative Dave Woollam told Business Day shareholders believed the business rescue practitioners had failed to perform and should be replaced.
“Sell Mozambique, Zimbabwe and Botswana [operations of Tongaat] to settle the lender group debt. This could be achieved either through a direct transaction or by creating a special purpose vehicle to house [those] investments along with the lender group debt, pending completion of the sale,” Woollam said.
He added that the second stage would be the recapitalisation and refinancing of Tongaat.
“We believe this is a more achievable proposition and can focus on optimising a structure which Tongaat can service and bring stakeholders together — finally. The sugar industry agreements need to be renegotiated, but first Tongaat, in good faith, must negotiate a settlement of the SA Sugar Association,” Woollam said.
“That is broadly our position. All that is happening now is that the lawyers, business rescue practitioners and countless other ‘helpers’ are being paid hundreds of millions while ‘Rome burns’.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.