Sugar producer Tongaat Hulett’s share price slumped nearly 20 percent following a shareholder announcement that its debt reduction milestones have been adjusted to avoid an event of default.
Tongaat yesterday released a shareholder update on its debt restructuring process. The share price which opened at R10,40 on yesterday was trading 19,32 percent weaker following the announcement. It dipped as low as R7,55.
Just before 16:00 it was trading down 18 percent at R8,48.
According to the notice, Tongaat indicated that R6,4 billion of its debt reduction transactions had been concluded. A total of R5,76 billion had been paid to South African lenders.
Tongaat had agreed to a second restructure of existing debt facilities — with revised debt reduction milestones requiring that it sign debt reduction agreements of R8,1 billion, of which at least R6 billion was to be paid by March 31, 2021.
While Tongaat managed to pay R6,01 billion to South African lenders at the end of March, the debt reduction agreements it signed for the period came to R6,65 billion. This falls short of the R8,1 billion required.
“In order to prevent an event of default, THL (Tongaat Hulett Limited) and the South African lenders amended the milestone measurement date from March 31, 2021 to April 31, 2021. “The parties are in advanced negotiations to amend the cumulative amount of the signed debt reduction transaction agreements from R8,1 billion to R6,4 billion, which will allow THL to meet the milestone,”
the notice read.
The milestone for June 30, 2021 remains unchanged, and Tongaat must sign cumulative debt reduction agreements amounting to R8,1 billion.
Providing an operational update, Tongaat said that it had to delay the planned annual maintenance shutdown of its sugar refinery to the off-season period to supply a 100 000 tonne increase in refined sugar as part of industry commitments outlined in the Sugar Master Plan.
While refined sugar production for the 2021 financial year increased by 40 percent to more than 450 000 tons, the extra pressure on the refinery production led to increased costs and process inefficiencies.
This resulted in a 25 000 tonne sugar production loss.
“This will have a material impact on the full-year financial results of the South African sugar operation, though the amount thereof has not yet been fully quantified,”
the notice read.
“It said that measures were taken to enhance the refinery process at the most recent maintenance shutdown to avoid a similar occurrence in future.