Tongaat faces JSE delisting after shareholders reject debt-equity swap

A delisting from the JSE is imminent for Tongaat Hulett Limited (THL) after shareholders rejected a proposed debt-equity swap that would have given Vision Consortium 97.3% of the shares, leaving shareholders with just 2.7%.

The rejection of the debt to equity swap paves the way for Vision to inject R8.6bn into the company in exchange for assets that had been put up for collateral with the banks.

The potential delisting of Tongaat Hulett from the JSE is a loss. The company, a key player in SA’s sugar industry for 130 years and with about 2,500 employees, has been a major part of the local economy, with a measurable performance on the GDP. 

A Sens announcement published on Thursday by Metis Strategic Advisors, the business rescue practitioners, stated that in light of the Vision transactions outlined in the adopted plan, the business rescue practitioners would proceed with executing the adopted plan to sell the company’s assets as a going concern, collectively to the Vision parties.

The turnaround experts added that this decision meant Tongaat Hulett’s business, including all its operations and employees, would be transferred to and managed by Vision Investments.

Though this process is more involved, it achieves the same result for employees, growers, creditors and suppliers. The key difference is that Vision Investments, which is the new owner, will now be fully owned by the Vision Consortium, rather than the 97.3% share they were hoping for if the resolutions had received shareholder approval. 

Metis highlighted that this will be a distinct process, which had already been incorporated into the adopted business rescue plan adopted in January 2024 as an alternative to the exchange of debt for equity.  

“This does not result in the liquidation of the assets of the company. THL — the currently listed company will be delisted — and will become an empty shell which, in time, will cease to operate and have no assets, whereafter it will be liquidated,” said Mentis.  

In January, creditors approved Vision’s plan to rescue the company by buying its estimated R8bn debt and converting it into equity through a debt-for-equity swap. To enhance and strengthen Tongaat’s balance sheet, Vision proposed swapping R5bn of the debt for equity and to keep R3.6bn as debt. This approach would improve the company’s financial standing.  

Tongaat Hulett entered business rescue in October 2022 after an investigation that uncovered questionable accounting practices. This court-ordered process allowed turnaround specialists to work on rescuing the financially distressed company while temporarily halting payments on its debt obligations. 

Vision investments said though it was disappointed that the current shareholders would ultimately no longer participate in the business, they had no regrets with the process followed. 

THL’s current shareholders exercised their democratic right when it came to the first option available to the business rescue practitioners to execute the approved Vision business rescue plan, said the company. 

“We understand their disappointment and disillusionment as they have seen their investment destroyed by the fraudulent activities of the previous THL management. However, Vision is not to blame as our role is to invest our own money and skills into saving THL and jobs and we are not linked to THL’s dramatic erosion of shareholder value,” Vision Investment said in a statement.  

The company said  shareholder support for the debt-for-equity swap, would have allowed THL to remain listed on the JSE and move closer to exiting business rescue by September 2024. However, the outcome of the vote also provided an opportunity to move forward with the second option to advance the business and protect jobs across all the regions where THL operates. 

“In terms of the Vision business rescue plan approved by THL creditors on January 11 this year, the unsecured creditors will be paid R75m by Vision. The R75m is securely in a bank account and will be escrowed shortly for distribution to the unsecured creditors.

“This is a significant goodwill gesture from Vision to support the unsecured creditors, some of whom will continue to be long-term suppliers of products and services to the new THL,” Vision said in the statement.  

Vision put forward that it has outlined ambitious and well-researched plans for THL, focusing on diversification and expansion into energy, such as ethanol and electricity from bagasse, to address regional energy supply and cost issues.  

The strategy includes improving overall yields, expanding the area under sugar cane cultivation, and generating sustainable jobs and opportunities for small-scale sugar cane growers.  

majavun@businesslive.co.za