Last minute deal saves Tongaat from liquidation

Durban High Court Judge Rithi Singh agreed to withdraw the application to place Tongaat into provisional liquidation on Wednesday. Photo: Joseph Bracken

• The Tongaat Hulett liquidation application was withdrawn at the 11th hour after talks running late into the night produced an agreement for the IDC to continue funding the company until the end of September.
• Vision will settle outstanding creditor claims including R517-million owed to the SA Sugar Association.
• More than 17,500 sugarcane growers rely on Tongaat’s mills, according to SA Canegrowers.
• The relief may be short-lived, as the full restructuring agreement still needs to be finalised by September.

Once again at the 11th hour, the winding up of sugar giant Tongaat Hullett was avoided with a deal struck for further funding from the Industrial Development Corporation (IDC) for a second time.

On Tuesday, on application by its business rescue practitioners (BRPs), Durban High Court Judge Rithi Singh agreed to withdraw the application to place Tongaat into provisional liquidation.

In April, when the application first came to court, it was adjourned when the IDC agreed that morning to provide further post commencement finance, increasing it from R2.3-billion to R2.5-billion, saying the extra R200-million would be available until the end of June. This allowed the company to open its mills ahead of the crucial sugarcane milling season.

The application was adjourned until 17 June.

Further affidavits filed by the BRPs and the Vision Group, which holds the only approved business rescue plan, accused the IDC of obstruction and indicated that liquidation was almost inevitable.

However, as the lawyers gathered in court to argue the matter, the BRPs circulated an affidavit, saying the position had “radically shifted” following ongoing talks late on 16 June.

This had culminated in the IDC agreeing to continue providing post commencement finance until the end of September.

The agreement provides a framework for Vision and the IDC to reach agreement on a restructuring solution and, according to a joint statement, will result in the IDC becoming a significant shareholder in Vision companies across South Africa, Zimbabwe, Mozambique and Botswana.

This would be done through restructuring the IDC’s post commencement finance into “equity”.

Vision would provide the funding required to settle and address creditor claims, including R517-million owed to the South African Sugar Association and R75-million to concurrent creditors.

All of this is subject to further negotiations and agreement that must be finalised by September, prompting comment from some stakeholders that the agreement, while a lifeline, may have a limited time span.

Responding to the withdrawal of the application, Higgins Mdluli, chairperson of SA Canegrowers said, “This agreement is a significant milestone in securing the future of the modern South African sugar industry. With the liquidation of Tongaat Hulett off the table, we hope that its mills and refinery can now focus on operating without interruption. More than 17,500 supplying sugarcane growers rely on Tongaat.”

While all parties agreed to the withdrawal, argument in court focussed on who should pay the costs of the application. Abrina, an independent cane grower, which has constantly cried foul over the business rescue process, wanted the BRPs to pay its legal costs.

But Judge Singh ruled that all parties must pay their own costs.

On Thursday, the judge will hear arguments in a counter-application, brought by Vision competitor, Mozambique based RGS Holdings, in which it wants the “unlawful, failed Vision plan” to be set aside. It alleges that Vision’s conduct amounted to a “corporate raid” and is seeking access to documents to investigate financial claims made by Vision.

The BRPs are strongly opposing the application, and they argue that RGS has never produced a credible or implementable rescue proposal, and that its proposed funding arrangements remained conditional and speculative.

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