Embattled sugar manufacturer Tongaat Hulett’s business rescue plan is still due to be released at the end of May.
The company, together with its subsidiary Tongaat Hulett Developments (THD), on Friday reiterated that the THD business rescue process aims to provide opportunities for continued land development through third-party buyers and for certain affected contractors to continue with projects, as well as to retain jobs.
Tongaat says it wishes to avoid adverse impacts on the KwaZulu-Natal property market and wants to mitigate the potential risk of unfulfilled infrastructure obligations.
Ultimately, the company wants to ensure a higher distribution to secured creditors rather than liquidation.
On successful implementation of the business rescue plan, secured creditors are expected to receive distributions of about 7c, compared with 2c if the company went into liquidation.
Creditors are due to vote on the business rescue plan on May 30.
THD was historically dependent on Tongaat Hulett Limited (THL) for access to working capital facilities. The financial stability of THD was therefore inextricably linked to the financial stability of the holding group. To this end, THD granted guarantees and provided security in respect of obligations of THL under the debt facilities made available by lenders to THL.
Consequently, all material assets of THD were secured in favour of secured creditors – the THL lenders.
THL’s lenders have claimed about R7.2-billion against THD, which, together with other business rescue claims against THD, amount to R7.7-billion.
This means that the direct liabilities of THD have increased and the net cash that can be released from the THD rescue will only amount to 7% of the R7.7-billion claims.
This means THD will not be able to pay distributions to unsecured creditors.
The business rescue practitioners comment that the objective is to secure an outcome which balances the interests of all stakeholders despite the difficult set of circumstances presented in the case of THD.
“The business rescue plan aims to mitigate a host of risks however, the reality is that THD’s liabilities significantly exceed the value of its assets, which will only satisfy around 7% of creditor claims,” they explain, adding that THD has continued to operate on a limited basis since entering business rescue in October last year.
The practitioners assure that they aim to optimise net sale cash inflows from the sale of property assets and the winding down of operations.