The South African operations of Tongaat Hulett have entered business rescue proceedings as it cannot repay lenders who will no longer extend part of its debt.
The company is in “financial distress”, which means directors had to voluntarily place it in business rescue. The process is designed to save the company from liquidation and keep creditors at bay.
Tongaat has more than R6.3bn in excess debt it cannot repay, which is increasing as interest mounts.
“While the company has interest from existing shareholders and potential new equity investors to support the recapitalisation and retain our existing operating footprint, no-one has been able to provide the total funds required within the time needed to do so,” Tongaat said.
Its South African lender had remained supportive and worked constructively with management since 2019.
To assist with the R1.5bn liquidity shortfall, the lenders advanced a new facility of R600m on July 29, which was due for repayment on October 25.
The lenders informed Tongaat they were unable to further extend the repayment date for the borrowing base facility.
Without this funding, the board determined that Tongaat was, or would be, facing “financial distress” as defined by the Companies Act.
The future of Tongaat, a key player in Southern Africa, with operations in Botswana, Mozambique and Zimbabwe, has been in doubt since early 2019 when it disclosed holes in its balance sheet due to the overstatement of profits, assets and revenues in previous years.
The takeover regulation panel, an agency of the trade, industry and competition department, scuppered Tongaat’s plans to raise R4bn via a rights issue underwritten by Magister Investments in May, when it nullified an earlier ruling that the Mauritius-based company would not have to make a mandatory offer to minorities.
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