Tongaat mum on Gumede buyout
The business rescue practitioners are also silent over the company’s debt deal
South Africa’s sugar industry is on tenterhooks as farmers and suppliers wait to hear the outcome of the bid by a consortium involving politically connected billionaire Robert Gumede for cashstrapped giant Tongaat Hulett.
News broke earlier this month that Terris Sugar, a consortium involving Gumede, had negotiated to purchase Tongaat’s R8billion bank debt from a group of 12 lenders for R2 billion borrowed from the Public Investment Corporation (PIC).
The distressed 130-year-old company was placed under voluntary business rescue last year over its debt crisis, sparked by R3.5 billion in accounting fraud by a number of its former top executives.
Last week the business rescue practitioners, Metis Strategic Advisors, confirmed that they had been informed of the proposal in writing, but have since maintained their silence, as have Terris and the PIC.
This is despite the 14 November deadline for Terris to secure the PIC loan and present proof of this to the business rescue practitioners, who have extended the deadline for the final Tongaat Hulett creditors meeting, set for 24 November.
More than 21000 sugar farmers who supply the company with cane for milling and processing, along with 40 000 employees in South Africa, Mozambique and Zimbabwe, are dependent on Tongaat Hulett for their livelihoods.
A spokesperson for Metis said last week that the transaction was “subject to payment of the purchase price for the lender claims which we are informed is expected to happen in the very near term”.
The development meant that Terris Sugar, consisting of Gumede’s Guma Africa Group, Zimbabwe’s Remoggo and Almoiz Industries, which is owned by Pakistani Nauman Khan, would “stand in the shoes and in replacement of” the banking lender group to which Tongaat was indebted.
This would allow Terris to take over the bank debt, and to acquire their voting interests that go along with it at a greatly discounted price.
But on Thursday the Metis spokesperson said there was “no further update” on the transaction. Rob Bessinger, the spokesperson for Terris, declined to comment, saying that he would only do so at the appropriate time. The PIC has also declined to comment.
PIC spokesperson Adrian Lackay said this week that rumours that the R2 billion transaction had been completed on Tuesday were “not factually correct”.
“Tongaat Hulett is in business rescue. Any interpretation of the PIC’S position as a shareholder of Tongaat Hulett outside of the business rescue process would be speculative until a business rescue plan is presented and agreed to by creditors,” Lackay said.
One of Tongaat’s small creditors, who asked not to be named, said they were informed this week that the Gumede deal was going ahead.
“They basically confirmed what has been reported, that Gumede plans to purchase the debt from the banks and that he can then dictate the terms at the creditors meeting when the rescue plan is voted on. This means we would get nothing,” the creditor said.
“We have been supporting Tongaat Hulett as normal since the start of the business rescue — other than demanding cash upfront for new work — in the hope that this would work in our favour when the rescue plan is finalised.
“But from recent discussion with the BRPS [business rescue practitioners] and Tongaat it is now clear that they couldn’t care.
“The banks will get something back, and the unsecured creditors like us are likely to end up with nothing, delay or no delay.”
Next month Tongaat and other sugar milling companies begin their annual maintenance shutdown, which takes place during the rainy season, the time at which sugarcane grows most vigorously.
The company is understood to have made or exceeded all its crushing targets for the last year, during which prices also improved by about R2 000 a tonne, some good news for an otherwise depressed sugar industry.
The sugar farmers supplying Tongaat are in the dark about the deal.
Kabelo Kgobisa, spokesperson for South African Cane Growers Association, the industry coordinating body, were still waiting for information about the transaction before they could make a comment.
Pratish Sharma, a Tongaat-based cane grower and member of the association’s board, said they were also waiting to hear about the company’s future.
“The things I have heard are those that have been in the news. The BRPS are not saying anything,” Sharma said.