Tongaat Hulett enters business rescue
Lenders run out of patience
South Africa's largest sugar producer is battling with the fallout of an accounting scandal, flooding and riots in KwaZulu-Natal, as well as with its own operational inadequacies.
Karl Gernetzky - Struggling sugar producer Tongaat Hulett, which is choking on a South African debt pile more than ten times its market value, is heading for business rescue after failing to get a nod from lenders on its restructuring plan.
The group needs R1.5 billion as it services roughly R6.3 billion in South African debt and continues its sugar milling season, but it said on Thursday that lenders, after advancing R600 million, now want this repaid.
\"The South African lender group has informed the company that in all of the circumstances of the restructuring plan, they are unable to support the restructuring plan, or provide the additional funding required,\" Tongaat said.
Tongaat\'s board approved a plan in October that includes disposing of its non-South African operations, securing investment for its South African business, introducing a five-year debt instrument that would be repaid through land disposals, as well as continuing to recoup money related to its accounting scandal.
The board has appointed Trevor Murgatroyd, Peter van den Steen and Gerhard Albertyn of Metis Strategic Advisors as the business rescue practitioners.
The firm\'s Botswana, Mozambique and Zimbabwe sugar operations are not financially distressed, the group said. These three businesses are funded independently from the company and \"should be largely unaffected by the adverse circumstances affecting the company,\" it said.
SCANDAL
The firm is battling to recover from an accounting scandal, South Africa’s second biggest after Steinhoff, while also trying to whittle down what it previously said was a R7.6 billion net debt pile.
It has been hit with a series of adverse events, including a downturn in the property market in KwaZulu-Natal that hobbled plans to sell property, civil unrest in that province which led to destruction of cane fields, and more recently flooding in the province.
Operational headwinds were also encountered \"in the form of the sugar loss at the refinery and poor milling performance, which revealed inadequate historic plant maintenance\", the company said on Thursday.
CEO Gavin Hudson had been appointed in 2019 to drive a recovery for the group. The over 150-year-old sugar producer had asked the JSE to temporarily suspend trade in its shares in June 2019 after an investigation flagged accounting practices that meant previous financial results could not be relied on.
INVESTIGATION
A PwC investigation identified 10 executives, including former CEO Peter Staude, who were allegedly involved in profit inflation. It also found that there was a culture of deference within Tongaat that led to employees not questioning accounting practices.
The PwC investigation identified practices that inflated profits, as well as practices that inflated the value of assets, including its sugar cane, and the company has been forced to restate previous financial results, including for the six months to end-September 2018.
That restatement resulted in total assets decreasing by about R12 billion, or just over a third. Charges have since been laid against former executives in a R3.5 billion fraud case, which is ongoing.
Tongaat has seen its shares lose more than 96% of their value over the past four years, and had again asked for a temporary suspension from the JSE in July, due to delays in releasing its results as it finalised its plan. – Fin24
The group needs R1.5 billion as it services roughly R6.3 billion in South African debt and continues its sugar milling season, but it said on Thursday that lenders, after advancing R600 million, now want this repaid.
\"The South African lender group has informed the company that in all of the circumstances of the restructuring plan, they are unable to support the restructuring plan, or provide the additional funding required,\" Tongaat said.
Tongaat\'s board approved a plan in October that includes disposing of its non-South African operations, securing investment for its South African business, introducing a five-year debt instrument that would be repaid through land disposals, as well as continuing to recoup money related to its accounting scandal.
The board has appointed Trevor Murgatroyd, Peter van den Steen and Gerhard Albertyn of Metis Strategic Advisors as the business rescue practitioners.
The firm\'s Botswana, Mozambique and Zimbabwe sugar operations are not financially distressed, the group said. These three businesses are funded independently from the company and \"should be largely unaffected by the adverse circumstances affecting the company,\" it said.
SCANDAL
The firm is battling to recover from an accounting scandal, South Africa’s second biggest after Steinhoff, while also trying to whittle down what it previously said was a R7.6 billion net debt pile.
It has been hit with a series of adverse events, including a downturn in the property market in KwaZulu-Natal that hobbled plans to sell property, civil unrest in that province which led to destruction of cane fields, and more recently flooding in the province.
Operational headwinds were also encountered \"in the form of the sugar loss at the refinery and poor milling performance, which revealed inadequate historic plant maintenance\", the company said on Thursday.
CEO Gavin Hudson had been appointed in 2019 to drive a recovery for the group. The over 150-year-old sugar producer had asked the JSE to temporarily suspend trade in its shares in June 2019 after an investigation flagged accounting practices that meant previous financial results could not be relied on.
INVESTIGATION
A PwC investigation identified 10 executives, including former CEO Peter Staude, who were allegedly involved in profit inflation. It also found that there was a culture of deference within Tongaat that led to employees not questioning accounting practices.
The PwC investigation identified practices that inflated profits, as well as practices that inflated the value of assets, including its sugar cane, and the company has been forced to restate previous financial results, including for the six months to end-September 2018.
That restatement resulted in total assets decreasing by about R12 billion, or just over a third. Charges have since been laid against former executives in a R3.5 billion fraud case, which is ongoing.
Tongaat has seen its shares lose more than 96% of their value over the past four years, and had again asked for a temporary suspension from the JSE in July, due to delays in releasing its results as it finalised its plan. – Fin24
Comments
Namibian Sun
No comments have been left on this article