Sticky delays keep sugar giant Tongaat Hulett in limbo

What began as a high-stakes turnaround of one of Africa’s oldest sugar producers is now mired in delays more than two years after Tongaat Hulett entered the business rescue process. Vision Investments, the preferred strategic equity partner in the rescue plan, missed its third payment deadline on 31 March.

Despite a business rescue plan approved by 98.5% of creditors and proof of funds from Standard Bank, Vision has yet to meet its financial commitments.

Promises, delays and shifting timelines

Under Vision’s approach, the group was to acquire a 97.3% stake in Tongaat Hulett through a R4.1-billion debt-to-equity conversion.

The lender group, a consortium of major South African banks including Standard Bank, RMB-FNB, Nedbank, Absa, Investec and the Land Bank, together hold the bulk of Tongaat’s debt. The group also includes asset managers and institutional investors. It held more than R8-billion in secured claims, according to Tongaat Hulett’s updated business rescue plan.

The deal has been plagued by delays. The first missed payment should have been received on 6 December 2023, but a year later a second deadline of 31 December 2024 also failed to deliver a payment. The deadline was pushed for a third time to 31 March, which also came and went without payment.

A source with access to the creditor group correspondence confirmed a paper trail of missed commitments.

On 15 January, confirmation that the 31 December 2024 payment had been made was requested. Werksmans Attorneys, on behalf of the business rescue practitioners (BRPs), confirmed it had not. On 21 January, Vision’s legal team responded, citing “frivolous challenges” as justification for extending the deadline again to 31 March.

A March update said Vision had secured credit approval for the outstanding amount and had received confirmation from the Lender Group to settle by 30 April.

Tongaat Hulett has defended its process, stating that “the BRPs are aware that the dates referred to were anticipated payment dates and not deadlines”. The company also said delays were not uncommon because of the complexity of the process and attributed them to “ill-founded litigation” brought by “spurious parties”.

Where is the money?

On paper, Vision’s funding appeared sound. A December 2023 letter from Standard Bank, included in the court filings of RGS, a Mozambique-based conglomerate that was also interested in acquiring Tongaat Hulett, stated that Vision “has sufficient cash to execute the contemplated transaction”.

This line was echoed in the business rescue plan. The original plan claimed “sufficient cash to execute the contemplated transaction”. This was changed in an overnight amendment before the final creditor meeting on 11 January 2024. Daily Maverick has accessed a recording of this meeting.

The revised version stated that the BRPs and the lender group had received “proof that the substantial cash deposit is held in a bank account in [SA]”.

No explanation was given for the change.

Gideon Slabbert, the chief operating officer of the Turnaround Management Association of Southern Africa, explained that there was no defined legal threshold for proof of funding in the context of a business rescue.

“Typically, financial guarantees and formal letters confirming proof of funds are sufficient to meet this requirement,” he said.

The rescue plan did include a fallback: if Vision failed to secure approvals for the debt-to-equity conversion, Tongaat Hulett’s assets would be sold off, followed by delisting and liquidation.

Despite funding delays, the sugar producer remains resolute. “We firmly believe the BRPs have acted in the best interests of the company,” Tongaat Hulett said in a written response to Daily Maverick. It added that Vision had confirmed its credit approval and that operations remained stable.

RGS: withdrawn but still watching

Vision’s only serious competition for the bid came from RGS, which withdrew its bid the evening before the creditor vote on 11 January.

“Despite repeated attempts to address our concerns, the BRPs showed clear bias in favour of the Vision consortium,” RGS told Daily Maverick. “[The BRPs] erected hurdles for RGS while granting Vision extra time to secure funding. The ongoing lack of trust left us with no choice but to withdraw.”

Still, RGS didn’t walk away entirely. In February, Judge Mfuniselwa Nkosi dismissed part A of RGS’s urgent interdict, which sought to block the Vision asset sale. However, part B of the application, seeking to have the entire rescue plan set aside, remains on the table.

“The subsequent switch to an asset-sale structure proves that Vision did not and [has] never had the needed capital, making the approved plan unimplementable in its original form,” RGS said.

Among RGS’s demands are copies of all acquisition agreements between Vision and the lender group, proof of payments made and confirmation that no backdoor assets are being used to pay Vision’s debt to the lenders.

No fixed matrix

Slabbert said there was no rigid framework when it came to selecting a strategic equity partner during a business rescue process. The quantum of the proposed transaction, social impact, timing, feasibility and regulatory requirements were factors typically considered, he said.

He also clarified that extensions of payment deadlines were not made unilaterally: “Such extensions require the consent of the relevant contractual parties, following due consideration of the prevailing circumstances.”

Although some information may be restricted for legal or financial reasons, Slabbert noted that regular business updates should be published publicly and submitted to the Companies and Intellectual Property Commission.

A sugar giant in limbo

The BRPs maintain that liquidation would yield even less for creditors even after three missed payment dates, an evolving transaction structure and a pending court challenge.

Standard Bank, which is both a lender to Tongaat Hulett and an adviser to Vision, said its involvement was “under continuous review to ensure compliance with our risk management policies and ethical standards”.

According to Tongaat Hulett, stakeholders were informed on 2 April that Vision had secured the required credit approvals. This message was repeated in a status report shared on 4 April.

Sifiso Mhlaba, executive director of the South African Sugar Association (Sasa), confirmed this. He added that the transfer of ownership from Tongaat Hulett to Vision was expected to take place on or before 31 May. Sasa is an unsecured creditor in Tongaat Hulett’s business rescue process.

This week, another regulatory green light arrived for Tongaat Hulett. On Wednesday, 16 April, a SENS announcement confirmed that Zimbabwe’s Competition and Tariff Commission had approved the asset sale to Vision, subject to employee-related conditions. These conditions were accepted, rendering the approval effective.

According to the announcement, this marks the last required competition authority sign-off across all jurisdiction involved in the transaction.

Slabbert noted that rescinding a bidder’s status isn’t simple and would require extensive consultation and legal review.

“Transactions of this nature are exceptionally complex,” he said. “Suitable and capable buyers are, by their nature, limited.”

Two rescue visions

Vision pitched a debt-for-equity plan, whereas RGS proposed a more community-centred rescue, with fresh capital and partnerships with local stakeholders.

Vision’s approach has largely relied on restructuring existing debt. When shareholders opposed Vision’s proposed share issuance, the consortium changed to an asset-sale model – an alternative that is likely to result in Tongaat Hulett’s delisting and the transfer of its operational assets to Vision.

RGS is adamant that its plan is fully funded. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35. The article has been updated to include the regulatory green light announced on Wednesday, 16 April.