The process to put Tongaat-Hulett into business rescue will be taken care of by Metis Strategic Advisors, which has been chosen by the board of the agri-processing group.
According to Moneyweb, Tongaat Hulett, a company that makes sugar and has been having money problems, said Thursday that it will start a voluntary business rescue process (BRP) because the company is in “financial distress.”
In a statement from Sens, the JSE-listed company, which is currently suspended from trading because it took longer than expected to release its latest financials, said that its debt levels are much higher than what it can handle.
Tongaat’s property division, will also go through the BRP because it gets its money from the company.
Botswana, Mozambique, and Zimbabwe will not have to go through the rescue process because their sugar operations are still making money.
Tongaat said, “The business rescue experts will look into the group’s business, think about the different options, and come up with a business rescue plan for the company’s affected people to consider.”
“The company sent the necessary paperwork to the Companies and Intellectual Property Commission (CIPC) on October 27, 2022, and is waiting for the CIPC to confirm that the paperwork was sent.”
This is not a liquidation of the company
The group is very sure that the fact that it has decided to go through a rescue process doesn’t mean that it will be shut down.
“Business rescue gives us a legal framework that lets the people who work in business rescue work with key stakeholders to find the best solutions to our financial problems.”
Issues related to debt
In the last few years, the KwaZulu-Natal-based company has had to deal with a number of problems, such as accusations of bad management, false financial statements, and rising debt levels.
Before a new group of leaders took over in 2019, the group had as much as R11.7 billion in debt. But since putting its turnaround plan into action under new management, Tongaat says it has been able to cut its debt by more than R6.6 billion by selling some of its non-core assets and, in some cases, some of its core assets.
Even with all of these efforts, the group says it is still unable to pay off this remaining debt. Most of it is covered by the cashflows from its South African sugar operations, its property business, and dividends and operational support fees from its sugar operations in countries other than South Africa.
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Plan for restructuring the company
In September, when it told the market that it had gotten a short-term R600 million borrowing base facility from a South African lender, the company with a lot of debt seemed to be making good progress with its plan to deal with its lack of cash flow.
But Tongaat had to pay back the loan and didn’t have any other ways to get money to support its plans to restructure, so the board thought it was necessary to move into BRP.
It’s not clear yet how long the rescue plan is expected to take, but the group said that its shares will remain suspended on the JSE until then.
