Embattled sugar producer Tongaat Hulett plans to hold a virtual shareholder meeting on December 9, to vote on the remuneration of the company’s business rescue practitioners (BRPs).

This follows the company entering into voluntary business rescue on October 27, with its shares remaining suspended on the JSE.

A fee agreement can only conclude if the requisite majority support is obtained from the creditors and shareholders of such company.

Tongaat reiterates that it is not being liquidated, but that the business rescue is rather an endeavour to proactively protect the business, jobs, creditors and other stakeholders. The board believes business rescue is likely to result in a better return to creditors than liquidation.

The Botswana, Mozambique and Zimbabwe operations are not entering business rescue, only two South African operations. 

The majority of creditors have approved an extension to the date of publication of a business rescue plan to January 31.

Tongaat has faced significant challenges following years of high and increasing debt levels, alleged financial misstatements and historic mismanagement under previous leadership.

The new leadership team and board have worked tirelessly since 2019 on delivering a comprehensive turnaround strategy. Good progress has been made on a variety of fronts, including realising cost savings and improving available funding.

Debt, specifically, has been reduced by more than R6.6-billion from a high of R11.7-billion. Despite the good progress, there is a shortfall in the company’s working capital facilities of about R1.5-billion, largely owing to the impact of Covid-19 and the unrest experienced in July 2021, in KwaZulu-Natal.

This shortfall is necessary to fund the peak working capital requirements to complete the 2023 financial year.

The South African lender group has unfortunately informed the company that they will not be able to continue supporting the company with additional funding in South Africa.

Without this funding, the board concluded that Tongaat is, or would be, facing “financial distress”, as defined by the Companies Act and that the South African operations are no longer financially sustainable without further liquidity.

In this context, the board has resolved to enter voluntary business rescue proceedings.

The company has appointed Peter Van den Steen, Trevor Murgatroyd and Gerhard Albertyn of Metis Strategic Advisors as the BRPs. They are said to be highly experienced and well-qualified, having completed various high-profile business rescues in South Africa in recent years.