Tongaat shareholders set to receive nothing

Investors in Tongaat Hulett appear virtually certain to receive nothing for their shares in the severely financially distressed JSE-listed sugar producer and property company.

Peter van den Steen, one of the joint business rescue practitioners (BRPs), said last week it was already envisaged in the first version of the business rescue plan that it is the intention to delist Tongaat Hulett and this will go into the amended business rescue plan, which is expected at the latest to be published by 31 October 2023.

Van den Steen said the business assets are to be sold out of the legal entities and it is envisaged the remaining legal entities will be wound down and ultimately liquidated.

“The shareholders will retain their shares but will receive no value for their shares,” he said.

“Unfortunately and regrettably that is not the news that … people wanted to hear. I am very sorry to be the bearer of bad news.

“We often do remind folks in the room that we didn’t form part of the breaking of it.

“We get to try and help as much as we can. We are trying to give it a good tonk.”

The company has been in business rescue since October 2022.

Trading in its shares was suspended by the JSE on 19 July 2022 because of its failure to publish its financial results within the stipulated time period.

The BRPs previously announced that Tanzania-based Kagera Sugar had been selected as the preferred strategic equity partner to acquire all of Tongaat’s sugar assets, including Tongaat Hulett Limited (THL) in South Africa and its investments in Mozambique, Zimbabwe and Botswana.

Van den Steen said the proceeds from the Kagera Sugar sale are estimated to be R3.6 billion plus the assumption of the post commencement finance (PCF) facility of about R1.7 billion. He said the proceeds from Tongaat Developments are estimated to be about R600 million against business rescue claims of R11,5 billion, which puts a negative equity value of R5.6 billion on THL.

“There are no prospects of there being an excess of asset value over liabilities, which would produce positive returns to shareholders even if it [the various businesses] were to be broken up,” he said.

Van den Steen added that the gap between the realisable value of THL assets from credible bidders and claims against Tongaat is too wide to bridge.

He said that if more value was to be gleaned from the assets through an alternative process, the creditors directly gain from any uplift in value before shareholders see any realisation.

“Secured creditors have the dominant business rescue vote at BR 80 percent. Creditors [not shareholders] will have the last word,” he said.

The Financial Sector Conduct Authority (FSCA) fined THL in August 2002 after it found the company made false, misleading or deceptive statements, promises or forecasts in its public statement to the markets over six years prior to the publication of its 2017 and 2018 annual financial statements.

The FSCA imposed an administrative penalty of R118,34 million on Tongaat for contravening the Financial Markets Act but noted Tongaat’s then financial position and, to avoid penalising innocent Tongaat shareholders further, decided to remit a portion of the administrative penalty and issued an order for Tongaat to pay a penalty of R20 million.– Moneyweb