Tongaat Hulett, which produces sugar in South Africa, Zimbabwe, Mozambique and Botswana, has refinanced its South African debt facilities.
Tongaat, whose debt burden has been unsustainable, said yesterday the completion of the refinancing of its existing South African debt facilities included its remaining term debt, working capital facilities, a revolving credit facility and overdraft facilities.
“With the support of the South African lenders the maturity of the existing senior debt facilities was extended to cater for the completion of the debt refinance, the terms of which have been revised from those agreed in a term sheet on June 12, 2021, due to the impact on liquidity from operational challenges and the social unrest in KwaZulu-Natal,” said Tongaat.
Tongaat said legal agreements with South African Lenders were signed earlier this month and were subject to conditions precedent that were fulfilled on Monday (December 6), giving effect to the refinance.
Tongaat said it was able to negotiate a sustainable core debt solution based on its capacity to service the debt from forecast operational cash flows with longer dated facilities to create stability for the company. The remaining balance of the debt that cannot be serviced from internally generated cash flows was allocated to two separate term loan instruments, it said.
“The debt refinance terms afford the company the opportunity to settle this remaining balance of the debt through strategic initiatives comprising an equity capital raise and property disposals over a period,” said the group.
Tongaat has previously raised concerns that its high debt levels and the absolute requirement of debt repayment were constraining investment in the business.
Tongaat, which was fined R7.5 million last year by the JSE for misrepresenting financial statements between 2011 and 2018, has been focused on debt reduction. Management reduced debt levels by 42 percent through asset disposals, cash flow management and cost reduction. Net borrowings at March 31, 2021, were R6.57bn, compared to R11.35bn in 2020. Tongaat which sold its starch business to a Barloworld subsidiary, paid R6bn to reduce its South African debt at the end of March, and fell short of the R8.1bn milestone required.
Tongaat warned on Monday it had swung to a loss in the six months to September due to the civil unrest in KwaZulu-Natal and parts of Gauteng in July. It expected to report a headline loss of up to R266m from restated earnings of R241m for the half year ended September.
The group said last month a successful rights offer would further reduce debt significantly, allowing management to focus on repositioning the business for long-term growth.
Tongaat, whose two primary focal points are sugar and property, is focused on delivering cost leadership as a sugar producer, and capitalising on the sizeable portfolio of premier commercial properties