Tongaat Hulett is headed for court to defend its business rescue plan

Southern African sugar giant Tongaat Hulett’s business rescue practitioners chose the Vision Consortium in January to lead the group out of its difficult financial circumstances. Photo: Supplied

Southern African sugar giant Tongaat Hulett’s business rescue practitioners chose the Vision Consortium in January to lead the group out of its difficult financial circumstances. Photo: Supplied

Published Apr 15, 2024


POWERTRANS Sales & Services, a creditor in the business rescue proceedings of embattled sugar company Tongaat Hulett (THL), has approached the High Court to have the business rescue plan for THL set aside.

In a statement on Friday, Powertrans, which was owed about R2 million by Tongaat, said that it had supplied evidence to the court suggesting Tongaat’s Business Rescue Partners (BRPs) yielded to pressure exerted by ‘the Lending Group’, a group of banks and financial institutions owed billions of rand by Tongaat, and an opaque consortium of businesses registered in Mauritius and the United Arab Emirates.

In February, an urgent interdict application to the court by Powertrans was dismissed due to lack of urgency. Powertrans was ordered to pay the costs, but RGS Group, which joined the application and which had put forward a competing business plan that was withdrawn at the last minute, was not.

Tongaat on Friday notified affected parties of the latest court challenge, but a spokesperson said they would not comment further.

In January, Tongaat creditors had voted in favour of a business rescue plan put forward by an investment consortium called Vision Investments in South Africa that would see unsecured creditors receive between 5c and 7c to the rand on their claims.

Powertrans has argued the business rescue plan unduly favoured the Vision Parties at the expense of the other parties, and the long-term viability of the business.

“There are grave questions regarding the Lending Group’s security, and the Vision Parties’ finances or lack thereof, and their ability to adequately deal with THL’s other financial risks. These have only been exacerbated by the complete lack of transparency demonstrated throughout the business rescue process,” Powertrans’ legal representative, Devin Moodley of DMI Attorneys, said in a statement on Friday.

Powertrans had provided servicing, maintenance, and repair services for THL’s plant equipment for many years. When THL entered voluntary business rescue in October 2022, the business was still owed R1.95m, excluding interest.

In its application, Powertrans said there was a real risk of Tongaat’s business’s collapse if the current business rescue plan was allowed to proceed unchecked.

Moodley said: “The ultimate purpose of our legal action is not to derail the business rescue process or to remove the BRPs, but rather to address several serious concerns regarding the legality and efficacy of the current business rescue plan.”

He said they believed that the Vision Parties and the Lender Group had been allowed to push through a plan that served their own interests, while disregarding the broader implications for Tongaat Hulett’s other creditors, employees, and shareholders.

“Not only are there several serious flaws in the plan and its adoption process... but the plan also fails to adequately address its supposed goal – which is rehabilitating the company and restoring it to solvency,” said Moodley.

He said the Vision Parties’ interest in the matter stemmed from its ongoing negotiations with the Lending Group to buy their claims and security in THL at a significant discount, which would leave them the majority shareholder in the business.

As a result, the BRPs previously confirmed that the Vision Parties had stated they would not vote for any business rescue plan that did not consider this agreement – which was supposed to be concluded before the final business rescue plan would be adopted.

In response, the BRPs abandoned an initial plan to sell the business to another strategic economic partner (SEP), Kagera Sugar, a Tanzanian sugar company, and developed a rescue plan that would give the Vision Parties ultimate control of the company.

However, “the Vision Parties twice failed to make the payments required to finalise their agreements and transactions with the Lending Group. And instead, the newly adopted business rescue plan now hinges on a third agreement between the Lending Group and Vision Parties being concluded... with no clear timeline or evidence of Vision’s financial capacity to execute the transaction.”