Tongaat Hulett faces liquidation after Vision and and BRPs clashed over business rescue plan

Vision Group's claims that it "remains steadfast in its commitment to the survival and long-term viability of Tongaat Hulett (THL)" stands in stark contrast to papers requesting provisional liquidation that was lodged by THL's court-appointed business rescue practitioners (BRPs).

In the founding affidavit for the provisional liquidation of THL, which were lodged at the KwaZulu-Natal High Court last week, the BRPs said the failure to implement the Business Rescue Plan had arisen "in material part, from Vision's inability or unwillingness to conclude binding funding arrangements with the IDC (Industrial Development Corporation), notwithstanding prior confirmation that Vision had sufficient funding available to conclude the transaction."

This, coupled with "Vision's opposition to interim funding alternatives and its continued pursuit of relief and write-offs" had also prevented the final approval of an application to the IDC for about R600 million interim relief funding, the BRPs wrote.

The BRPs, Gerhard Albertyn, Trevor Murgatroyd and Petrus van der Steen said further in their affidavit: "the refusal by Vision to extend the closing date in respect of the various sale agreements such that those agreements have lapsed, and the BRPs will not be able to implement the Plan..."

The affidavit provides a long chronology of meetings between the IDC, the Department of Trade, Industry and Competition, the BRPs, THL management and Vision Group, since June last year, when it became apparent to the BRPs that South Africa's biggest sugar group was going to require additional funding before the business rescue plan to succeed.

"Tongaat has no access to urgent required funding, nor does it appear it will be provided with the much, needed interim further funding to sustain its operations and meet its payment obligations from the end of March 2024. This is particularly as a consequence of recent correspondence exchange between Vision and the IDC, and the imposition of conditions which neither of the parties are prepared to meet," the BRPs said.

Included in those exchanges was a proposal by Vision for the BRPs to sell THL's offshore operations, prior to the more "complex" conclusion of the sale of the South Africa business, which the BRPs said was in fact prohibited by an existing finance agreement with the IDC, a proposal that was "ludicrous and untenable."

After these events, Vision, as a secured creditor, then demanded the immediate payment of R11.74 billion from Tongaat.

In contrast to the BRPs' views, Vision, led by billionaire Robert Gumede, said in a statement: "The filing today follows the failure of the business rescue process to effectively stabilize THL operations and maximise a turnaround, leaving liquidation as the necessary legal mechanism to allow secured creditors like Vision to take direct control of the assets and initiate a comprehensive recovery plan of the South African sugar business."

Vision had also, in the last few months, demanded that, as a precondition to signing the Tongaat Sale of Business Agreement, that "an in principle reform to the sugar industry be agreed upon by all relevant stakes," which the BRP's said  "is not a feature of the (Business Rescue) Plan," and which had caused "not only complications, but delays."

The BRPs said THL's liabilities vastly exceed its assets, and their decision for a winding up had followed months of extensive engagement, negotiations and many discussions and meetings between various stakeholders.

Vision said "the BRPs... had to act in the best interest of the creditors."

"As the lead secured lender with a substantial exposure to THL, under the proposed provisional liquidation, Vision will now focus its attention to securing control over the assets that had been pledged as security, and to protecting the integrity of the business, its loyal workforce, its extensive network of growers and suppliers and the communities that have hosted the business for over 130 years," Vision said in a statement.

The group said the provisional liquidation process provided the most transparent path for government and other key stakeholders to engage in a structured rehabilitation of the assets without the BRP and their advisors, who were appointed in October 2022.

The impact of a total collapse of THL South African operations could be immense - some 250 000 jobs are supported in the cane growing sector. Of these, 220 000 are based in KwaZulu-Natal and 30 000 in Mpumalanga, alongside the 2 600 direct employees at Tongaat South Africa.

Vision group said since the approval of the Vision BR Plan over two years ago, it had invested billions of rands, to acquire the Lender Group claims, assisted management to turnaround Tongaat plants, sought new clients, assisted in recruitment of key leadership, engaged government through Minister of DTIC for industry reforms and to save jobs and the sugar industry.

BUSINESS REPORT