Tongaat Hulett and Vision’s planned debt-for-equity swop quashed by no-vote from shareholders

EDWARD WEST

edward.west@inl.co.za

TONGAAT Hulett’s business rescue practitioners (BRPs) said the failure by shareholders at a meeting to approve a share subscription would result in “a more laborious” business rescue process, but with “effectively the same outcome”.

“Considering shareholder approval has not been obtained for the equity subscription, (which would have resulted in the Vision Consortium owning 97.3% of Tongaat’s shares) this suspensive condition is unfulfilled. The BRPs will continue to implement the Adopted Plan,” a statement from Tongaat’s BRPs said.

This meant that the Tongaat Hulett business, along with all its operations and employees, would be transferred and housed inside Vision Investments in future.

“The difference is the new owner (Vision Investments) will have the Vision consortium as its 100% shareholder, instead of 97.3% as was hoped for as an outcome if shareholders voted in favour of the resolutions that were tabled for their consideration today,” Tongaat’s BRPs said.

The business rescue process would therefore be according to an alternative process, as envisaged also in the business rescue plan, to the exchange of debt for equity.

“This does not result in the liquidation of the assets of the company. Tongaat Hulett, the currently listed company, will be de-listed – and will become an empty shell which, in time, will cease to operate and have no assets, whereafter it will be liquidated,” the BRPs said in a statement.

Tongaat shareholder and Opportune Investment chief investment officer Chris Logan said in an interview after the meeting there were different views about the ability of Vision to control Tongaat, after the failure of the shareholder resolutions last week, because “some believe Vision will need to get shareholder approval to buy the assets of the group”.

Logan said he did not vote in favour of the share subscription because he could not be part of a scheme to dilute his shareholding by 97.3%, after the group had not published audited financial statements for three years. In addition, the vote was contrary to JSE listing requirements, he said.

He said the process painted a bleak picture of the governance of South Africa’s financial markets.

The BRPs had said at the meeting they were unable to finalise audited financial statements for 2022 because of the group’s going concern status and the inability to value group assets under those circumstances. Also, later financial statements could not be released because of the inability to release the 2022 financial statements.

The jaundiced view by existing minority shareholders of the business rescue plan, as reflected in the shareholder vote on Thursday, comes as an earlier bidder for Tongaat, the Mozambique-based RGS consortium, which puled out of the bidding process at the 11th hour, has since made a new offer for the group on seemingly better terms than the Vision Group and its stakeholders.

The Vision Consortium was appointed by the BRPs when Tongaat was put into business rescue late in 2022.

The business rescue plan had included the acquisition of R4.9 billion of claims of the banks which were owed over R8bn by Vision, and the utilisation of a portion of such Lender Group claims by Vision to subscribe for the shares in Tongaat Hulett by way of a debt-to-equity exchange.

The approval and implementation of the equity subscription would have resulted in Vision Investments owning 97.3% of the shares of Tongaat. At the meeting, shareholders had also questioned whether the Vision consortium had sufficient funds to invest to get Tongaat back on its feet.

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.