SOUTH African agriculture and agri-processing firm, Tongaat Hulett Limited’s, debt-to-asset swap deal with the Vision Group has been challenged by a failed bidder over alleged irregularities, throwing into disarray the ZAR5,9 billion deal.
RGS Group Holdings Limited, a Mozambican conglomerate, filed an urgent application on November 6 in the High Court of South Africa, KwaZulu Natal Local Division, Durban, seeking an interdict to the debt-to-asset swap deal.
RGS had initially made an offer to rescue Tongaat in November 2023, together with Vision (a South African investment consortium), but pulled out in January as it felt the agriculture firm’s business rescue practitioners favoured the latter.
Locally, Tongaat operates through its wholly owned Triangle Sugar operation and a 50,3% shareholding in the agriculture and agro-processing firm, Hippo Valley Estates Limited.
“In the application, RGS has sought to interdict the implementation of the adopted business rescue plan and in particular the Vision asset transaction entailing the sale of THL’s assets and business to the Vision parties,” Tongaat said, in a statement last week.
“Such interdict is sought pending a determination of Part B of the application. RGS additionally seeks disclosure of a host of information by the business rescue practitioners and the Vision parties to set aside the business rescue plan of the company as approved and adopted by the requisite majority of creditors on January 11 2024.”
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Vision’s winning bid was a debt-to-equity deal whereby Tongaat’s claims and security held by its creditors valued ZAR8,5 billion, ZAR4,9 billion would be converted to a 97,3% stake in the latter. The remainder would be retained by Vision as debt owed by Tongaat.
Tongaat shareholders later rejected the debt-to-equity deal in August, as it would have prejudiced them of their stake in the firm leading to the debt-to-asset deal being adopted.
Under this transaction, Vision would assume all Tongaat’s assets with a book value of ZAR5,9 billion (US$330,05 million).
RGS is challenging the debt-to-asset deal which entails not only Vision acquiring all Tongaat’s assets, but the agriculture firm delisting from the Johannesburg Stock Exchange and being liquidated.
Both the debt-to-equity and asset deals were made as part of Tongaat’s business rescue plan entered in January, after the firm’s total claims and debt reached ZAR13 billion (US$726,75 million) in October 2023.
“The Vision asset transaction will culminate in the delisting and liquidation of THL (Tongaat). That result can never be undone and would signal the death of a 132-year-old company, precisely the outcome that the business rescue process in general and the adopted plan in particular are designed to avoid,” RGS chairman Momade Rajahussen said, in the court application.
“The business rescue practitioners have confirmed that they are proceeding the implement the Vision asset transaction without first seeking further approval from either creditors or shareholders and despite their ignorance regarding the status of the acquisition.”
According to the court documents, RGS alleges that Vision is in breach of the law as it failed to complete the debt-to-equity deal by not proving it had enough funds to carry it out as per stipulation.
Based on this, RGS alleged that the adoption of the debt-to-asset deal is irregular.
This led RGS in July and September to submit a new offer to acquire Tongaat, out of the business rescue plan.
“In terms of the offer, ZAR4 451 451 350 will be injected directly into THL. ZAR4 billion of this will then be used by THL to settle the LG claims in full with the remaining ZAR451 451 350 being used by THL to immediately settle all unsecured creditors claims up to ZAR75 000 and 65 cents in the rand of any remaining unsecured claims (that is, above R75 000),” Rajahussen said.
“The balance of 35 cents in the rand of remaining unsecured creditors’ claims will then be repaid in five equal instalments.”
LG stands for lender group, the group of lenders to Tongaat who are all secured creditors.
Rajahussen said the RGS deal would not lead to Tongaat delisting or getting liquidated.
RGS has sought that Part A of its court application be heard on November 28 and Part B, thereof, on an expedited date to be arranged with the court.