As Minister of Trade, Industry and Competition, Parks Tau, announced during the Frank Dialogue on B-BBEE in South Africa in Durban on Saturday that he would step in to resolve the impasse in the business rescue process of Tongaat Hullets Limited (THL), he is indeed meeting stakeholders this morning.
Tau’s timely intervention aims to save THL from liquidation and save many jobs and small sugarcane growers’ biggest market.
Unfortunately, not many in the public and the sugar sector stakeholders understand that the mere entering of a notice to defend a liquidation application is meaningless unless you offer the immediate availability of working capital cash to cover at least six months of a company’s operations.
They also seem not to understand that secured creditors must agree not to call for payment of their debt in terms of the insolvency laws.
There has been an avalanche of intervening parties including the IDC, Minister Tau , farmers etc with over 200 lawyers in court last week but none have yet offered to cover the six months working capital costs of R600m and convince lenders – namely Vision Consortium and the IDC – that they would accept not to be immediately paid their due and payable outstanding payments since THL is in breach.
Vision Group’s due is R11.7 billion and IDC’s is R2.3 billion.
In short, there is no way a court can stop a liquidation if the above-mentioned basics are not covered. THL still remains in business rescue pending the High Court’s decision to liquidate or not.
Vision Group’s R11.7 billion is secured by 100% shares of THL , assets (plants and equipment) , debtors’ book, IP’s, and all properties whilst the IDC only security is finished stock up to the value of R2.3 billion.
In a liquidation scenario, the IDC shall lose R1.5 billion of their secured claim of R2.3 billion.
It is clear that Vision are the only most secured creditor who stand to benefit and get all the remaining assets of THL after the liquidation unless somebody offers Vision more than R11.7 billion for the business of THL plus working capital of at least R1.5 billion.
In the absence of an agreement between Vision and the IDC the BRPs are duty bound in terms of the Companies Act to apply for liquidation.
In addition, if none of the opposing parties before the court are able to present an alternative proposal that is to Vision’s satisfaction, their opposition is meaningless.
As Vision holds the majority statutory voting interest any proposal that does not satisfy Vision is nothing but stillborn.
The only viable and sustainable option is for Vision and the IDC to enter into an agreement on the affected South African business.
The mistake everyone is making is undermining Vision’s strong position as the general secured lender. Vision Group was smart to acquire all the debt and claims from the 13 banks with a stated goal of the debt to own THL.
As outlined by Vision, they have spent the last two years helping and preparing to take over the whole of THL and are not sellers of any of the THL assets .
Sizwe sama Yende is a veteran journalist and podcaster of The People’s Eye. He has extensively covered the Tongaat Hulett story.
Tau’s timely intervention aims to save THL from liquidation and save many jobs and small sugarcane growers’ biggest market
