Business mogul Robert Gumede’s Vision Group has called on embattled sugar giant Tongaat Hulett Limited (THL) shareholders to vote for a plan to swap its debt for assets.
Vision Investment spokesperson Rob Bessinger said the company will have the option of exercising its right in terms of the agreed Vision Plan to conduct a debt-for-asset swap of all THL assets.
Bessinger said these assets form part of a debt package that included all the assets in the operating businesses in South Africa as well as all shares in the operating businesses across the other jurisdictions.
“As part of a debt-for-asset swap, Vision will move all the operating businesses on a going-concern basis, assets and employees, into new entities in which it will have 100% equity interest with no legacy obligations,” said Bessinger.
“Current shareholders will receive zero value for their shares as the THL entity will be wound down / liquidated through the business rescue process.”
Bessinger said this in a media statement released this week.
Debt-to-equity swap vote
His assertion comes as shareholders are scheduled to meet on Thursday to vote on a debt-to-equity swap meant to result in Tongaat Hulett being out of business.
“At the shareholders meeting convened through the publication of the circular, the long-suffering current shareholders of THL have two options as per the approved creditors business rescue plan, namely, vote in favour or against the debt for equity swap,” said Bessinger.
“Should shareholders vote in favour, the current shareholders will retain 2.7% of the JSE-listed shares of a company that is recapitalised and has a good chance of future growth.
“Should the debt for equity resolutions not be approved, Vision will have the option of exercising its right in terms of the agreed Vision Plan to conduct a debt for asset swap of all THL assets that are included in the debt package, which include all the assets in the operating businesses in South Africa as well as all shares in the operating businesses across the other jurisdictions.
“As part of a debt-for-asset swap, Vision will move all the operating businesses on a going-concern basis, assets and employees, into new entities in which it will have 100% equity interest with no legacy obligations.
“Current shareholders will receive zero value for their shares as the THL entity will be wound down/liquidated through the business rescue process.
“Whether shareholders support the proposed resolutions or not, the approved vision plan will continue to be implemented, and THL operations will continue in their current guise or under new entities.
Fraudulent activities
Tongaat Hulett’s assets were placed in business rescue in October 2022 due to the effects of fraudulent activity at the company during the preceding years.
“The operating THL investments in Botswana, Zimbabwe and Mozambique were not placed under business rescue.
“Immediately prior to being placed in business rescue, the company had breached its loan covenants and was unable to pay back or settle the R7-billion of debt it owed to a consortium of SA banks at the time.
“The banks had all the assets of THL as security, which assets had a lesser value than the outstanding debt, implying a negative equity value for THL.”
Bessinger said the Thursday meeting was another important step towards Tongaat Hulett coming out of business rescue after assets were originally placed in business rescue in October 2022 as a result of the effects of fraudulent activity at the company during the preceding years.
Agricultural economist Dr Kobus Laubscher, however, accused Vision of repeatedly failing to raise the full funds necessary.
“In 2023, a previous acquisition agreement between Vision and the lenders was leaked during court proceedings related to THL’s financial obligations to the South African Sugar Association,” said Laubscher.
Circular from the BRPs
This agreement required Vision to pay the purchase price by December 6, 2023, failing which the agreement would terminate.
Said Laubscher: “Vision’s failure to meet this deadline was confirmed during a court hearing on December 7, 2023. Despite this, the BRPs [business rescue practitioners] continued to push ahead with their flawed vision plan.
“It appears Vision has not subsequently raised the necessary money. A circular from the BRPs regarding the conversion vote indicates that Vision has acquired only the R4.9-billion portion of the lenders’ claims.
“The remaining R3.6-billion in debt remains with the lenders, leaving THL facing financing costs of R448-million per year.
“This raises questions about why Vision has not acquired all the lenders’ claims as promised and what effect this failure will have on its plan.
“Without an explanation, the unavoidable inference is that Vision has again failed to raise the full funds.”
