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RCL Foods has withdrawn its application for an interdict to stop creditors from voting on an “unlawful” business rescue plan for Tongaat Hulett Limited filed by ANC funder Robert Gumede’s Vision consortium after the business rescue practitioners agreed to amend the plan.
The withdrawal of the court action means that the vote on the rescue plans presented by Vision and rival bidder RGS Sugar, which has been postponed a number of times due to legal battles, should go ahead on Wednesday, as planned.
However, the details of the latest amendments to the Vision plan have not yet been made public by business rescue practitioner Metis and there is still a possibility that the matter could end up back in court.
RCL, which owns Selati Sugar, had gone to court to stop voting on Vision’s plan, which did not comply with an earlier court order by Judge Rashid Vahed that the rescue plans needed to include the more than R526 million in unpaid industry levies which Tongaat owes.
Tongaat entered voluntary business rescue in November 2022 due to the crisis it faces over a massive loss in value, triggered by alleged fraud of R3.5 billion by managers in its property division and former chief executive Peter Straude.
Vision — consisting of Gumede’s Guma group, Remogoggo and Pakistani agribusiness company Almoiz — and RGS Sugar from Mozambique, have both submitted rescue plans.
RCL went to court to stop the voting on the Vision plan, which did not accommodate the unpaid industry levies, upon which the growers who fall under the South African Sugar Association (Sasa) depend for their survival.
It did not oppose the vote on the plan submitted by RGS, which has undertaken to pay the levies, prevent retrenchments and to make payments to smaller, unsecured creditors who are owed by Tongaat.
In papers before court, RCL managing director Michela Cutts said that the Vision plan was “patently unlawful” and that the company was opposing it as it “seeks to unlawfully compromise” the existing claim by Sasa.
Cutts said the Vision plan was also unlawful as it persisted with its position that it would only settle its industry obligations should funding be available for it to do so.
Metis had, she said, failed to advise on which plan should be put to the vote and had instead continued to present an unlawful business plan on behalf of Vision.
Cutts said that the court had correctly characterised the levies to Sasa as being part of the cost of doing business in the sugar industry and that neither Vision nor the business rescue practitioners (BRPs) had the legal right to make payment conditional.
On Sunday, an RCl spokesperson confirmed that they had agreed to withdraw the interdict application after Metis undertook to amend the Vision plan to ensure that it complied with the order of the court.
“In our view, the Vision plan, published by the BRPs on 2 January, was unlawful because it did not provide for settlement of Tongaat’s statutory obligations, as directed by the recent judgment by Judge Vahed,” the spokesperson said.
“Following our application, RCL Foods engaged with the BRPs who agreed to changes to the Vision plan, as a result of which our application will be withdrawn.”
However, RCL remained “concerned” about the impact that the Vision plan would have on growers and millers if it is the option voted on by the creditors as it “assumed that Sasa will not be paid for at least three years”.
By contrast, the RGS plan “provides for immediate settlement of the Sasa claim amount while not leaving any other affected party worse off”.
“We hold the firm view that it is not justifiable to force growers and millers to bear the cost of Tongaat’s business rescue through delayed payment.”
The Vision group had approached the Public Investment Corporation to fund its purchase of the R8 billion in secured debt that Tongaat owes to a group of banks — giving it control of the creditors’ vote — but had failed to meet the deadline set by the BRPs twice.
It is not clear at this point whether or not it was able to secure the funding.
The RCL spokesperson said they had gone to court “in the best interests of the broader sugar industry, including our small-scale growers who are not in a position to protect their interests through litigation”.
“RCL believes that Tongaat’s future viability is critical, but at the same time, that it is vital to ensure that the business rescue process does not undermine the entire industry,” the spokesperson said.
Metis declined to comment on the RCL interdict, saying that they would communicate through the normal SENS process.