Tongaat Hulett progresses debt restructuring

PROGRESS with Tongaat Hulett’s debt restructuring plan has resulted in a new R600 million Borrowing Base facility being concluded with the South African lender group which will remain in place until 30 September 2022. An option to upsize the facility is being negotiated, subject to credit approvals. The South African lender group has also not enforced the contractually agreed interest rate margin increases to date.

The intention is for the Borrowing Base facility by the lenders to be increased from R600 million to R750 million and extended to the end of the 2023 financial year. This is dependent on the mutual agreement of the Board’s restructuring plan. In addition, negotiations with funders outside of the lending group to secure a further R750 million are progressing. If both engagements are successful, the company states that total liquidity requirements of the South African operations will be met for the 2023 financial year.

As part of the conditions of the Borrowing Base facility, a Board approved plan is to be available by 23 September 2022 aimed at dealing with excess debt in South Africa, currently estimated to be around R6.3 billion.

The plan is currently exploring options including an equity capital injection by strategic partners at various levels within the Group, the disposal of some or all of the African operations, or a combination thereof. When assessing the disposal of the African operations, a key consideration is the ability of the South African operations to operate as a listed entity on a standalone basis, and the ability to fund the necessary reinvestment to be sustainable long-term.

The company anticipates reporting  a headline loss per share of between 676 cents and 632 cents in the year to end-March 2022 compared with end-March 2021 restated headline loss per share of 440 cents.

As part of the transition to new auditors, the Group revisited a number of complex technical accounting matters. This resulted in the restatement of the prior year’s financial statements. In aggregate, the restatements improve both earnings per share and headline earnings per share for the year ended 31 March 2021 by approximately 190 cents.

The operational update saw strong local demand across all the sugar businesses and good market share gains help offset an 8% reduction in overall sugar production; resulting in revenue generation in line with the prior year. Lower sugar production stemmed mainly from poorer agricultural performance in Zimbabwe and unsatisfactory milling performance in South Africa. The Mozambique sugar operations delivered excellent results.

The property market in KwaZulu-Natal remains subdued with limited appetite for development property investment in the aftermath of the COVID-19 pandemic, the civil unrest and recent flood damage. This culminated in fewer and smaller transactions being finalised at a slower pace.

The publication of the annual results for the year ended 31 March 2022 is dependent on approval of the restructuring plan. The company states that every effort is being made to publish the financial results and integrated report and request the listing of the JSE’s temporary suspension of its share as soon as possible thereafter. In the meantime, Tongaat Hulett’s business operations will continue as usual.

Gavin Hudson, CEO of Tongaat Hulett said: “We continue to progress the turnaround and restructuring plan that will be delivered to the board at the end of September. We have also addressed the Group’s short-term liquidity needs and are working to extend the Borrowing Base Facility as a matter of urgency.’

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