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Tongaat CEO seeking to freeze payments on R11bn of debt

The company is in the process of selling assets and cutting costs to strengthen its balance sheet, says CEO.

Tongaat Hulett is asking 10 lenders for a break from payments on as much as R11 billion ($790 million) of debt so it can recover from the impact of having to restate accounts, according to chief executive officer Gavin Hudson.

The embattled South African sugar maker is spending about R1 billion a year servicing the borrowings and is looking to negotiate a freeze by the end of July, Hudson said in an interview at Tongaat’s 19th century Durban headquarters, an old farmhouse surrounded by sugar-cane fields. The company is in the process of selling assets and cutting costs to strengthen the balance sheet, he said.

Tongaat Hulett’s head office at Amanzimnyama Hill in Tongaat, KwaZulu-Natal. Image: Supplied

“Tongaat is not a quick fix, but we are considering all options,” said Hudson, a former SABMiller executive who took the top job in February. “We could potentially generate about R800 million to R1 billion on disposals, depending on a few things, including getting the right buyers,” he said.

Read: Tongaat Hulett’s former CEO poorer after share price dive

Hudson’s task is to rescue a company that asked for its shares to be suspended in June after finding that financial results for the year through March 2018 can’t be relied on. Tongaat has said South African police are investigating an unnamed former executive for his role in the crisis, which involved booking profit on certain transactions before they were finalised, two people with knowledge of the matter said last month.

The crisis at the sugar maker bears some resemblance to the financial crisis that has engulfed South African retailer Steinhoff International, albeit on a smaller scale. The owner of Pep stores throughout Africa and a stake in Mattress Firm of the US is stuck in critical talks with lenders some 19 months after the scandal broke, and says a group of employees led by ex-CEO Markus Jooste inflated profits and asset values.

Read: The winners in the Steinhoff mess

Tongaat’s Hudson and his team meet daily in a “war room” to discuss the restructuring of core businesses including sugar, starch and property-development units, he said. “We have been implementing cost cuts, from reducing head count to the sheets of paper being used in the printers,” the CEO said. Tongaat isn’t yet planning a rights offering, though that option is always on the table, he said.

The overall headcount will be reduced by about 2%, or as many as 600 people, mainly by removing layers of management and closing offices in South Africa, Hudson said. Businesses identified for disposal include packing plants in Botswana and Namibia and game farms in Mozambique and Zimbabwe, he said.

© 2019 Bloomberg L.P.
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And has the ex CEO or CFO been charged with fraud? No! Why? NPA and SAPS belong in the toilet they are so incapable.

Something is really wrong in the South African business arena…

We need a commission of inquiry into SA state of businesses… The JSE, audit firms and the boards have let the South African community down… Something smells fishy here.

We need to investigate before its too late.

Ag nee-Commissions are a total waste of time and money. South Africa has turned into a nation of greedy thieves because they have abandoned Christian values of honesty and integrity and replaced it with greed being the love of money.

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