SOUTH African agriculture and agri-processing firm, Tongaat Hulett Limited, will continue with a proposed debt-to-asset swap transaction worth ZAR5,9 billion (US$330,05 million) despite a court challenge, the company has said.
RGS Group Holdings Limited, a Mozambican conglomerate, on November 6 filed an urgent application in the High Court of South Africa, seeking an interdict to the debt-to-asset swap deal.
RGS filed the application claiming that the debt-to-asset swap would entail not only Tongaat’s buyer, Vision Group acquiring all of its assets, but the delisting of the agriculture firm and liquidation.
RGS had in November last year made an offer to rescue Tongaat, together with Vision (a South African investment consortium), but pulled out in January after accusing the agriculture firm’s business rescue practitioners (BRPs) of favouring 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.
“An urgent application was launched on 6 November 2024 in the High Court of South Africa, KwaZulu Natal Local Division, Durban, under case number D13702/2024, by RGS Group Holdings Limited, against, inter alios, the company, the BRPs, Vision, the Lender Group and Powertrans Sales and Services,” Tongaat said, in a statement on Friday last week.
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“The full details of the application are set out in the BRPs' notice to affected persons dated 7 November 2024. Part A of the application was set down for hearing on 28 November 2024, but has been postponed by the court until 29 January 2025. In the interim, there is nothing precluding the BRPs from continuing to implement the asset transaction in accordance with the plan.”
Tongaat’s and the BRPs’ heads of argument, its response to the RGS urgent application, are due at the beginning of February 2025.
“The business rescue practitioners continue to advance the preparatory steps for the implementation of the adopted and amended business rescue plan for THL as approved and adopted by the requisite majority of creditors on Thursday 11 January 2024 in accordance with section 151 of the Companies Act. 2.1.2,” Tongaat said.
“The BRPs are continuing to implement the adopted plan, focusing on the alternative transaction in accordance with the Plan, which contemplates the sale of the company’s business and assets as a going concern, as a group, to the Vision parties.”
Vision initially wanted to buy Tongaat through a debt-to-equity deal where ZAR4,9 billion from the latter’s claims and security held by its creditors valued at ZAR8,5 billion, would be converted to a 97,3% stake in the latter. The remainder would have been retained by Vision as debt to Tongaat.
However, Tongaat shareholders rejected the debt-to-equity deal.
“The asset transaction is a complex multi-jurisdictional transaction requiring consideration of, inter alia, the regulatory requirements and implications in each jurisdiction in which the business and assets of the company are located, tax optimisation, consideration of licencing and permit/authority requirements, required land transfers, assignments of contracts and requisite counterparty consents, employee transfers, interactions with key stakeholders,” Tongaat said.
The stakeholders include the lender group, the Industrial Development Corporation of South Africa Ltd and shareholder bodies.
The lender group is the group of lenders to Tongaat, who are all secured creditors.
“The lender group have confirmed to the BRPs that they too are unaware of any impediments to the implementation of the asset transaction,” Tongaat said.