Legal Challenge Questions Tongaat Hulett Business Rescue Plan's Validity

The ongoing saga of Tongaat Hulett's business rescue process has escalated as new allegations emerge, suggesting underhanded dealings and potential prejudice to the sugar giant's financial future. Durban-based Powertrans, steered by its sole owner, businesswoman Mohini Naidoo, has submitted a damning affidavit challenging the proposed rescue plan set in motion by the Business Rescue Practitioners (BRPs) and supported by Standard Bank-led lender group.

This legal move has thrown the legitimacy of the rescue plan adopted on January 11, 2024, into question, particularly the terms of the lender group's agreement with the Vision consortium, which is set to inherit a large portion of the company’s R8.5-billion debt. Powertrans demands the adoption of this plan be annulled, as it believes the terms both violate the statutory obligations of the BRPs and materially disadvantage the stakeholders of Tongaat Hulett.

Naidoo's accusations are based on the discrepancies between the commitments made by the Vision consortium to creditors and the recent revelations in a BRPs circular to shareholders dated July 10, 2024. This document admitted that the Vision consortium would not acquire all lender group claims before the business rescue conclusion and that a R3.6 billion claim would persist post-rescue. This disclosure was never communicated to creditors when they authorized the plan, alleges Naidoo. The contention is that the new acquisition terms were covertly agreed, leaving Tongaat Hulett straddled with a hefty claim without clarity on the necessary asset sales to settle it.

Furthermore, Powertrans alleges that Vision was inappropriately advantaged by having a significant part of the purchase price potentially funded by the sale of Tongaat Hulett's assets, a leeway not extended to other interested parties. Powertrans points out the inadequate oversight by BRPs and unauthorized and injurious terms that the lender group and Vision parties agreed upon.

The implications of these undisclosed adjustments are far from trivial. Naidoo posits that essential assets, like Tongaat Hulett’s Mozambican business, may be sold, which could have afforded the sugar producer approximately USD 200 million, a value alarmingly equivalent to the R3.6 billion claim by the lender group.

Amidst these legal disputes, Tongaat Hulett faces another challenge - substantial interest payments due to delays, and is uncertain about extending the Industrial Development Corporation’s business rescue financing.

The BRPs and Vision consortium deny any wrongdoing, countering allegations of impropriety, while suggesting that Naidoo’s actions are influenced by Mozambican bidder RGS. Naidoo retorts that her litigation is not for personal gain but to assert her right for a transparent rescue process.

As the shareholders' meeting looms on August 8, to decide on issuing additional shares that could see the conversion of part of the debt held by Vision into an almost complete controlling stake, shareholders seek clarity on their rights and the value of their shares. The legal conundrum has energized shareholders, who now hold leverage in an unfolding corporate battle, indicating that the fate of Tongaat Hulett hangs in the balance, its conclusion far from certain.