Tongaat Hulett has a future, business rescue practitioners say

Forecasts for the future of Tongaat Hulett have improved amid the increasing likelihood of a buyout.

This was revealed as part of the long-awaited business rescue plan for the struggling sugar giant, published last week after being delayed multiple times.

The company’s business rescue practitioners (BRPs) said Tongaat Hulett Limited (THL) has a “future” as the search for strategic equity partners (SEP) is in the process of being finalised before a creditor voting deadline on June 14.

“While a substantial number of potential SEPs were initially considered, this has been narrowed down to eight potential partners. They are well advanced in their due diligence processes. Final offers are expected to be received during June 2023,” said the BRPs.

Offers include SEPs looking to purchase the company in its entirety, as well as those offering partial investment.

It is understood that three of the eight offers are from large entities seeking full purchase, while the others are for constituent parts of the company.

In the event that a partial purchase is agreed upon, all unsold assets will be auctioned off separately, said the BRPs.

South African Canegrowers CEO, Thomas Funke, said they would be in favour of a full sale which could continue daily operations of the company.

“This is the least disruptive avenue, and one which SA Canegrowers would support, provided certain fundamentals are in place to safeguard the ongoing sustainability of the role that Tongaat Hulett plays in both the sugar industry and, in turn, the broader KwaZulu-Natal economy,” he said.

As for the daily operations of the company, the BRPs said it had paid growers and crop maintenance in full since business rescue proceedings were entered into voluntarily last October.

Claims of R1-billion from before the process had been paid to assist with industry stability, while R400-million in post business rescue supplies had also been met.

This aside from around R400-million in off-crop maintenance before the current growing season, which the BRPs say is the most comprehensive maintenance done in many years.

All of which points to some solidity in the industry should the promises of SEP investment pay off.

“A constant factor in our minds in the execution of this business rescue is the enormous social impact of the businesses under our care. It is beyond question that the successful rescue of especially THL’s sugar operations in South Africa will save tens of thousands, possibly hundreds of thousands, of direct and indirect jobs,” said the BRPs.

They also confirmed a partial payout structure of between R45- and R90-million for unsecured creditors who would have received nothing should the company have entered liquidation.

Considering the dour tone that the business rescue plan of Tongaat Hulett Developments – a subsidiary of THL – struck two weeks ago, this is all positively hopeful.

More than 99% of creditors of Tongaat Hulett Developments voted in favour of adopting the plan last Tuesday.

That same voting process for THL will take place on June 14, by which time it is hoped that significant progress will have be made on selecting a strategic equity partner.

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