Sugar producer Tongaat Hulett said on Thursday it had been placed under business rescue as a result of its debt burden.
The struggling company said its debt levels remained well in excess of what could be serviced and delays in its recapitalisation had worsened the situation.
Tongaat, which has in recent years been rocked by allegations of mismanagement and financial misstatements, has a debt burden of R6.3-billion.
“While the company has interest from both existing shareholders and potential new equity investors to support the recapitalisation and retain our existing operating footprint, no one has been able to provide the total funds required within the time needed to do so,” it said in a statement.
The KwaZulu-Natal-based company said its South African lender had remained supportive and had worked constructively with management since 2019, but had now informed the firm that “in all of the circumstances of the restructuring plan, they are unable to support the restructuring plan or to provide the additional funding required”.
Tongaat had a R1.5-billion liquidity shortfall. The company’s lenders advanced a new short-term borrowing base facility of R600-million on 29 July 2022, which is now due for repayment.
The debt restructuring plan approved on 14 October was designed to repay the company’s excess debt and address its liquidity constraints. It included disposing of the company’s non-South African sugar operations, securing a sponsor to support the capital reinvestment and introducing a five-year debt instrument repayable through the disposal of certain landholdings.
Tongaat said it also initiated discussions with other potential funders outside the existing lender group, but these efforts had not culminated in additional funding.
“Without the required additional funding, and an extension of the repayment date of the borrowing base facility, and having taken extensive legal advice, the board has determined that Tongaat Hulett is facing circumstances constituting ‘financial distress’ within the definition contained in section 128 of the Companies Act,” the company said.
Tongaat said the business rescue practitioners would investigate the affairs of the group, consider the various options available and develop a business rescue plan for consideration.
Business rescue is a legal process that aims to facilitate and rehabilitate a financially distressed company.
Tongaat Hulett’s shares will remain suspended on the JSE bourse and shareholders have been advised to continue to exercise caution in relation to the company.
