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Tongaat shareholders voted against the debt-for-equity resolution which would have resulted in a debt-for-equity swap at Tongaat Hulett.
The financially troubled, suspended Johannesburg Stock Exchange-listed sugar and property developer has seen its shareholders’ value significantly diluted after its proposal failed to garner enough support to be passed at Thursday’s shareholder meeting.
A special resolution to allow the issuance of additional Tongaat shares received 48% in favour, 52% against and 3.78% abstentions. The resolution requires at least 75% of votes to pass.
A general resolution (subject to a special resolution with the requisite majority) seeks specific powers from Tongaat shareholders to issue new shares to Vision Investments worth R4.86 billion that have not yet been issued, pursuant to Vision Investments’ business rescue plan for Tongaat.
Vision’s business rescue plan was approved at a creditors’ meeting on January 11, 2024.
Vision is a coalition of entrepreneurs comprising Robert Gumede of Guma Agri, Rute Moyo of Remoggo, Amre Youness of Terris Sugar and Nauman Khan of Almoiz.
If these resolutions are passed at the general meeting, implementation will result in significant dilution of value for existing Tongaat shareholders, leaving them with only 2.7% of the company.
The resolution also failed to pass, with 48% of votes in favor, 51.99% against and 3.8% abstentions.
Trevor Murgatroyd, director of Tongaat’s business rescue agency (BRP) Metis Strategic Advisors, said after the voting results were announced that Tongaat could not proceed with the transaction envisaged in the circular as the special resolution number was not passed.
However, Murgatroyd said the approved corporate rescue plan remained binding on all parties.
“We will now investigate and commence implementation of the alternative transaction contained in the adopted business rescue plan, which includes the sale of assets as a transaction. “When I say sale of assets, I do not mean the dissolution of the group.
This is a sale of the group’s assets, including shares in subsidiaries and realignment of the South African sugar business. “BRP of Tongaat will communicate the next steps to shareholders,” he said.
Ahead of the Tongaat shareholders’ vote on the debt-for-equity swap, dark clouds are gathering, with some of Tongaat’s minority shareholders believed to be planning to vote against the resolution, Moneyweb reported.
Prior to the vote, Murgatroyd answered a series of questions and stressed the BRP’s view that the alternative of not approving the resolution was “far more dire than passing it.”
“If the resolution is passed, a roadmap for a corporate rescue plan will be developed and implemented, the South African Sugar Association (SASA) escrow funds and creditors will be paid… (and) the debt-for-equity conversion has not yet been formally implemented.
“The alternative is that if we do not vote in favor of the resolution, the risk of liquidation will increase significantly,” he said. However, if shareholders vote against the debt-for-equity resolution and the proposed debt-for-equity swap (of all Tongaat assets included in the debt package) is implemented, there seems to be a possibility of legal challenges.
Controversial debt asset element Analyst and investor David Woollam, who is part of the Tongaat shareholder group and directly holds about 20% of the company, confirmed on Wednesday that he expects to take legal action if a vote is cast against the debt-for-equity swap and attempts are made to implement it. – Moneyweb
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