Ahead of an August 8 vote by Tongaat Hulett shareholders on whether to proceed with an equity subscription by the Vision Group consortium, agricultural economist Dr Kobus Laubscher has expressed reservations about the transaction.

The transaction will, if it proceeds, result in Vision holding a majority stake in Tongaat, which is in business rescue.

Laubscher says the business rescue practitioners’ (BRPs’) legal obligation to implement the plan depends on Vision’s ability, from both a financial and regulatory perspective, to honour the plan’s stated objectives by relieving Tongaat of its R8.5-billion debt bill through acquiring the lenders’ claims.

Under the current plan, Vision would convert R4.9-billion of this debt into shares in Tongaat and retain claims worth R3.6-billion, promising more favourable terms for the remaining debt than provided by the lenders.

Only after fully acquiring the lenders’ claims can the debt-to-equity transaction proceed granting Vision control of Tongaat. Vision’s full acquisition of the lenders’ claims is the quid pro quo required before the conversion.

Laubscher, however, questions if Vision has the required funds to execute the plan.

He further claims that the terms of the agreement and any material developments between Vision and the lenders have never been disclosed, leaving creditors and shareholders in the dark.

Creditors and shareholders have a right to this information, especially if it impacts the BRPs’ or Vision’s ability to implement the rescue plan, he states.

He also says the deviation from the Vision plan, evidenced by the lenders holding onto R3.6-billion of debt, undermines Tongaat’s financial stability.

The BRPs, meanwhile, state in an August 6 notice to Tongaat shareholders that they remain of the opinion that the approved plan is capable of implementation and that shareholder support will be in the best interest of all Tongaat stakeholders and will expedite the conclusion of the business rescue process.

In a statement issued on August 2, Tongaat reiterated that the business rescue plan was approved by creditors in January, adding that it is legally binding on all affected persons, including creditors and shareholders.

“There has not been any need to amend the adopted business rescue plan as it is being implemented in accordance with the terms. There is currently no indication that the approved plan will not be implemented by the BRPs as contemplated,” it stated.

Tongaat says it finds it strange that statements are made about allegations of nonpayment without input from the relevant sources such as the lender group.

Meanwhile, shareholders of Tongaat voted against the debt-to-equity swap transaction between the companies, which Vision noted with disappointment, saying that current shareholders will ultimately no longer participate in the business.

"We understand their disillusionment as they have seen their investment destroyed by the fraudulent activities of previous Tongaat management. However, Vision is not to blame as our role is to invest our own money and skills into saving Tongaat and jobs. We are not linked to Tongaat's dramatic erosion of shareholder value."

The outcome of the vote does not stop the implementation of Vision's business rescue plan that was adopted in January. Vision hoped that Tongaat could remain listed on the JSE and exit business rescue by September as a precursor to returning to a business-as-usual situation.

Vision will proceed to access its right to conduct a debt for asset swap of all Tongaat's assets that are included in the current debt package linked to R8.6-billion of secured debt. The debt package includes all the assets in the operating businesses in South Africa as well as all shares in the operating businesses across the other Southern African Development Community jurisdictions.

"This second option allows us to move forward with a new unlisted entity, giving Vision a fresh start without any legacy obligations. With all the assets, including the Tongaat brands, in a new unlisted company owned 100% by Vision, we will honour the Competition Commission Tribunal’s ruling that includes taking over the Tongaat staff and supporting the small-scale growers," Vision explained.

The consortium added it is unfortunate that the decision today by the current shareholders means they shall receive zero value for their shares and the Tongaat entity devoid of assets being ultimately wound down / liquidated through the business rescue process, closing the curtain on the 100+ year old JSE-listed Tongaat.