Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — Investor Presentation (September 2023)
18 slides from Tongaat Hulett's investor presentation, Sep 26, 2023
Slide 1: Tongaat Hulett Limited Business Rescue Proceedings
Tongaat Hulett Limited Business Rescue Proceedings BRP/Shareholder Engagement Joint Business Rescue Practitioners: Trevor Murgatroyd Peter van den Steen & Gerhard Albertyn
Slide 2: Meeting Agenda
Meeting Agenda 1. Welcome and apologies 2. Background i. General ii. Tongaat Hulett specific 3. Sum of the Parts 4. PCF and Working Capital 5. Further Complications 6. Project Totum 7. Status Quo 8. Discussion
Slide 3: Background - General
Background - General • Accounting irregularities (exposed 2019) well publicised - significant role in filing for business rescue (“BR”) • BRPs and management cooperating with authorities in investigations • BRPs are forward looking - working towards a plan focused on saving jobs and optimising retur
Slide 4: Background – General Continued
Background – General Continued • Chapter 6 of the Companies Act (“Act”) sets framework of rules and regulations that have to be adhered to • The Act specifically requires that BR “balances the rights and interests of all relevant stakeholders” • Company law and insolvency law - creditors rank ahead
Slide 5: Share Price Analysis
SHARE PRICE ANALYSIS SHARE PRICE (ZAR) 200,00 180,00 160,00 140,00 120,00 100,00 80,00 60,00 40,00 20,00 0,00
Slide 6: Background – Tongaat Hulett
Background – Tongaat Hulett • Company in severe financial distress at BR commencement in October 2022: o Operations suspended due to lack of funding o 2022/23 crushing season needed to be completed/funded o Critical off-crop capex/maintenance programme needed to be completed/funded o Borrowings fore
Slide 7: Debt Profile Analysis
DEBT PROFILE ANALYSIS DEBT PROFILE THL SUGAR TOTAL DEBT (R'bn) TOTAL INTEREST ACCRUED (R'm) 1 2 3 4 5 6 7 12 300 R11.0bn 1. Reduction in debt as a result of carry over finance and export proceeds received. 10 250 2. Peak in interest as a result of an initial restructuring - MILLIONS (INTEREST ACCRUE
Slide 8: Background – Tongaat Hulett Continued
Background – Tongaat Hulett Continued • By October 2022 Multiple initiatives to restructure Tongaat had already failed: o New management team sought to turn Tongaat around since March 2019 (concurrently dealing with the accounting irregularities) o With c.R12bn in debt facilities, Lenders had attemp
Slide 9: Sum of the Parts (THL Company)
Sum of the Parts (THL Company) • Realisable value of company’s assets materially less than its liabilities • Liabilities at the commencement of BR = c.R10.1bn (LG Debt and Creditors) • Net value of assets: o Balance Sheet: at October 2022 assets c.R5.9bn vs liabilities c.R10.1bn = negative equity va
Slide 10: PCF and Working Capital
PCF and Working Capital • Cash was urgently needed to recommence operations (LG facilities frozen) • Without PCF, TH would be in liquidation before rescue got off the ground • Initial PCF from Lenders of R900m - short-term stability, enabled restarting of Mills and Refinery • Subsequent increase to
Slide 11: Further Complications
Further Complications • Social and economic catastrophe threatening KZN was unprecedented: o Estimated direct and indirect job losses = c.2500 employees + further c.23,000 indirect jobs in some of the most rural areas in KZN o c.43% of TH sugarcane from independent farmers, over 15 000 of which are
Slide 12: Further Complications Continued
Further Complications Continued • IDC generously provided PCF, which has assisted in avoiding the threatened social and economic catastrophe (if SA Sugar failed) • Lenders hold security over all of the Group’s material assets – some subsequently taken as security by IDC to facilitate PCF provision •
Slide 13: Project Totum
Project Totum • Term of PCF (a vital lifeline that kept TH liquid) required that Sugar assets remained intact - moratorium on sale (or marketing) of the African subsidiaries individually o Agreed to by the BRPs and the Lenders • BRPs thus ran an urgent accelerated process (“Project Totum”) to dispos
Slide 14: Project Totum Continued
Project Totum Continued • Project Totum had three main phases: o Phase 1: Initial engagement - submission of a detail expression of interest (13 selected from the 21 to progress to Phase 2) o Phase 2: Sharing of high-level information, management presentations and Q&A - submission of further express
Slide 15: Status Quo
Status Quo • Heads of agreement have been signed • The structure of the Kagera Transaction is in the form of separate agreements for: 1. SA sugar business operations (including the head office operations) 2. Shares and claims in Tongaat Botswana 3. Shares and claims in Tongaat Zimbabwe 4. Shares and
Slide 16: Status Quo Continued
Status Quo Continued • Even if the group were broken up – creditor claims will far exceed proceeds and still no value for shareholders • Gap between realisable value of assets (from credible bidders) and claims against TH is too wide to bridge • If there were more value to be gleaned from the assets
Slide 17: Status Quo Continued
Status Quo Continued • Lots of publicity recently originating from bidders who have either not been selected as the preferred SEP or who missed the transaction timelines • In line with BR regulation, credible alternative offers may be presented for consideration by Creditors • The BRPs would welcome
Slide 18: Thank You
Thank You
Tongaat Hulett — Investor Presentation (September 2023) on 6ix