Durban — Powertrans, a creditor involved in the business rescue proceedings of embattled sugar company Tongaat Hulett Limited (THL), has approached the Durban High Court to have the adopted business rescue plan for THL set aside as invalid and unlawful.
This follows allegations concerning the failure of the business rescue practitioners (BRPs) to fulfil their fiduciary duties.
As part of its legal action, Powertrans has supplied evidence suggesting that the BRPs yielded to pressure exerted by “the Lending Group”, a group of banks and financial institutions and an opaque consortium of businesses registered in Mauritius and the United Arab Emirates.
Led by private investment company Vision Investments in South Africa, this consortium has been dubbed the “Vision Parties”.
Powertrans’s legal representative, Devin Moodley of DMI Attorneys, said their aim in approaching the High Court was 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 business rescue plan.
Powertrans filed its founding affidavit for the notice of motion in court on April 5 and it asked the court to enrol the matter for a hearing in June.
Moodley said: “They (the respondents) have 10 days from the date of service to file their notice of opposition and thereafter 15 days to file their opposing affidavit. June 4 is an unopposed date for a hearing in the High Court and if the matter becomes opposed it will be removed from the roll on that date and allocated a date on the opposed motion roll. They have not entered into an appearance to defend at this point.”
Powertrans 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 R1.95 million, excluding interest.
“We believe that the Vision Parties and the Lender Group have effectively been allowed to push through a plan that serves 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 from a technical and legal perspective, 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 there were grave questions regarding the Lending Group’s security, 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, and underscore the problematic nature of the current business rescue plan. By challenging this self-serving plan, Powertrans hopes to have it set aside and to compel the business rescue practitioners to fulfil their responsibility to safeguard the interests of all affected parties, as well as the future of Tongaat Hulett itself.”
The founding affidavit states that the Adopted Plan promises that THL will be rescued and will “continue in business albeit under new ownership”, adding that the Adopted Plan offers unsecured creditors, such as Powertrans, an aggregate total distribution of R75m pro-rata to their claims payable subsequent to the implementation of the so-called Vision Transactions on which the Adopted Plan is premised.
It adds: “The Unsecured Creditor Distribution is invariably stated and referred to by the BRPs and Vision Parties in its aggregate total. In fact, it means that unsecured creditors stand to receive, at best, a paltry 5c in the rand. The Vision Parties’ offer to unsecured creditors stands in stark contrast to the value of the assets to be acquired by the Vision Parties, free from their pre-business rescue liabilities. Much stands to be gained by the Vision Parties and the Lender Group, whereas unsecured creditors such as Powertrans, and hundreds of other individuals and entities whose claims are similarly unsecured, are intended to suffer heavy losses.”
It says the Vision Parties have not succeeded in raising the funds required to settle the purchase price required to acquire the Lender Group’s claims and security and that pending this uncertain future event at an uncertain future time, the transaction implementation timetable in the Adopted Plan cannot even commence.
Sunday Tribune