Tongaat shareholders voted against debt-for-equity swap Resolutions that would have resulted in a debt-for-equity swap at Tongaat Hulett.
A significant dilution in value for shareholders in the financially distressed suspended JSE-listed sugar and property developer failed to receive sufficient support to pass at a general meeting on Thursday.
A special resolution to enable the issue of additional Tongaat shares received 48 percent of votes in favour and 52 percent against, with 3,78 percentabstentions.At least 75 percent of the votes cast were required to be in favour of the resolution for it to pass.
A general resolution, which was subject to the special resolution being passed by the required majority, sought specific authority from Tongaat shareholders to issue R4,86 billion new but unissued shares in the company to Vision Investments in terms of the Vision Investments business rescue plan for Tongaat.
Vision’s business rescue plan was approved at a meeting of creditors on 11 January 2024.
Vision is an entrepreneurial consortium made up of Robert Gumede of Guma Agri, Rute Moyo of Remoggo, Amre Youness of Terris Sugar and Nauman Khan of Almoiz.
The implementation of the resolutions, had they been passed at the general meeting, would have resulted in a significant dilution in value for current Tongaat shareholders and them only retaining 2,7 percent of the shares of the company.
This resolution also failed to pass, with 48 percent of the votes in favour, 51,99 percent against and 3,8 percent abstaining.
Trevor Murgatroyd, a director of Metis Strategic Advisors, Tongaat’s business rescue practitioners (BRP), said after the vote’s outcome was announced that, as a consequence of the special resolution number not being passed, Tongaat is unable to proceed with the transaction contemplated in the circular.
However, Murgatroyd said the adopted business rescue plan remains binding on all parties.
“We will now investigate and commence implementation of the alternative transaction, which is contained in the adopted business rescue plan, which, among other things, includes the sale of assets as a transaction.“When I say sale of assets, it’s not to break up the group.
It is the sale of the group’s assets being the shares in the subsidiaries and the moderations of the sugar business in South Africa.“The BRPs of Tongaat will keep the shareholders updated in relation to the next steps,” he said.
Storm clouds were gathering ahead of Tongaat shareholder vote on the debt-for-equity swap with Moneyweb reporting that a group of minority shareholders in Tongaat were believed to be planning to vote against the resolutions.
Prior to the vote taking place, Murgatroyd responded to a number of questions and stressed that the view of the BRPs is that the alternative of not approving the resolutions “is far more dire than if the resolution is passed”.
“If the resolution is passed, we have got a road map set out in terms of the business rescue plan that we go and implement and the SASA (SA Sugar Association) escrow funds and creditors get paid … (and) the conversion [of debt to equity] is not formally implemented.
“The alternative is that if we did not vote in favour of this the risks of liquidation increase immensely,” he said.However, there appears to be a possibility of a legal challenge if the proposed debt-for-asset swap – of all Tongaat assets that are included in the debt package – is to be implemented in the event that shareholders vote against the debt-for-equity swap resolutions.
Contentious debt-asset elementAnalyst and investor David Woollam, who is part of a group of Tongaat shareholders who directly own about 20 percent of the company’s shares, confirmed on Wednesday that he expects legal action if the vote is against the debt-for-equity swap and an attempt is made to implement the debt-asset swap. – Moneyweb