The business rescue practitioners (BRPs) of sugar company Tongaat Hulett have published updated business rescue plans for the company and its subsidiaries, Voermol Feeds and Tongaat Hulett Sugar SA, focusing on two business rescue plan proposals.
Following the publication of a business rescue plan in May and the subsequent adjournment of the Section 151 meeting of creditors, the BRPs have been working closely with interested and affected parties towards securing a new strategic equity partner (SEP).
During July, Kagera Sugar was announced as the selected SEP. However, it has been announced that Kagera’s proposal cannot be considered at this time for various reasons, including a requirement in its proposal for exclusivity. Its proposal has therefore not been included in an additional amended business rescue plan.
To provide creditors with the best possible outcome, the BRPs have published two business rescue plans that outline two separate proposals by Mozambique conglomerate RGS Group and a group of entities referred to as the Vision Parties, comprised of Terris Sugar, Guma, Remoggo and Almoiz.
“The BRPs have consistently stated that business rescue is a creditor-driven process and that we are there to develop, facilitate and implement a plan which balances the interests of all stakeholders. In this context, we presented two amended business rescue plans today for creditors’ consideration,” the BRPs said in a joint statement, adding that they are confident that they are presenting fair and balanced business rescue plans under challenging circumstances.
“Importantly, we want to highlight that these amended business rescue plans are substantially improved from those put forward by the bidders during the SEP process. This will result in improved outcomes for a variety of affected persons, particularly creditors and potentially shareholders,” the BRPs said.
Following these comments, creditors have been invited to vote in a pre-meeting proxy vote to determine the order in which the two plans will be considered at the formal meeting of creditors to be held on December 8.
At this meeting of creditors, if the first plan voted on is not approved by the requisite majority of creditors, the second plan will be presented and voted on by creditors. If the first plan is approved and adopted, there will not be a vote on the second plan.
The RGS and Vision business rescue plans share a number of similarities. Among these is the purchase by RGS or Vision of secured claims and security entitlements, as well as the future conversion of those secured claims into equity, thereby substantially improving the solvency of Tongaat.
Both plans also feature an enhanced unsecured creditor distribution compared with a zero cents in the rand expected liquidation outcome.
In addition, both plans feature the continued listing of Tongaat on the JSE with existing shareholders remaining invested in the company, although with their shareholdings expected to be diluted – as opposed to a nil entitlement in either a liquidation, or sale of assets and business transaction.