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TONGAAT HULETT LIMITED - Signing of Legal Agreements for Debt Refinancing

Release Date: 07/12/2021 08:12
Code(s): TON     PDF:  
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Signing of Legal Agreements for Debt Refinancing

Tongaat Hulett Limited
(Registration number 1892/000610/06)
Share code: TON
ISIN ZAE000096541
("Tongaat Hulett" or "the Group" or “the Company”)

SIGNING OF LEGAL AGREEMENTS FOR DEBT REFINANCING

Shareholders are referred to the announcement published on SENS on 25 June 2021 and the Annual
Financial Statements for the year ended 31 March 2021 in relation to the ongoing negotiations of the
refinancing of debt.

The Company is pleased to announce the completion of the refinancing of its existing South African
debt facilities (the “Debt Refinance”), including its remaining term debt, working capital facilities, a
revolving credit facility and overdraft facilities (the “Senior Debt 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 12 June 2021, due to the impact on liquidity from operational challenges and the social
unrest in KwaZulu Natal. Legal agreements with South African Lenders were signed on 3 December
2021 and were subject to conditions precedent that were fulfilled on 06 December 2021, giving effect
to the Debt Refinance.

A primary principle underpinning the Debt Refinance was to negotiate a sustainable core debt
solution based on the Company’s 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 is allocated to two separate term loan
instruments (comprising Senior Facility C and Senior Facility D (see description below)). 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.

The refinanced Senior Debt Facilities (the “Refinanced Debt Facilities”) are governed by a
Common Terms Agreement (the “CTA”) concluded between the Company, certain of its subsidiaries
(as guarantors) and the various South African lenders such that, other than in relation to overdraft
and ancillary type facilities, each individual lender participating in one of the Refinanced Debt
Facilities participates on the same commercial terms as the other lenders participating in that facility
and has the same rights and obligations as it pertains to each of the Refinanced Debt Facilities. The
CTA makes provision for three new term loan facilities, as well as a revolving credit facility, overdraft
facilities and ancillary facilities as described further below. The underlying exposures of each
individual lender to these facilities is managed by an appointed facility agent and would be governed
by an intercreditor agreement between lenders.

The following facilities (the high-level commercial terms of which are indicated below in each case)
form part of the Debt Refinance (together with various ancillary facilities):
  Facility                       Amount and           Final maturity   Pricing and any applicable       Other key
                                 purpose to which     date             margin adjustments               commercial
                                 to be applied                                                          features
  Senior Facility                R1, 050,000,000.     30 June 2024     JIBAR corresponding to           Interest
  A:                             To discharge                          relevant interest period (of 1   serviced from
                                 existing financial                    month or 3 months) plus a        internally
                                 indebtedness                          margin of 5.05% before any       generated cash
                                                                       Margin Step Up Event or a        flows.
                                                                       margin of 6.17% applied
                                                                       retrospectively from
                                                                       refinance date following any
                                                                       Margin Step Up Event.

                                                                       If an event of default is
                                                                       continuing a margin step up
                                                                       of 2% applies.




  Senior Facility                R1,400,000,000.      30 June 2024     JIBAR corresponding to           Revolving in
  B                              To discharge                          relevant interest period (of 1   nature with
                                 existing financial                    month or 3 months) plus a        redraws
                                 indebtedness and                      margin of 5.33% before any       allowed up to
                                 for general                           Margin Step Up Event or a        the facility limit.
                                 corporate and                         margin of 7.06% applied
                                 working capital                       retrospectively from             Interest
                                 purposes                              refinance date following any     serviced from
                                                                       Margin Step Up Event.            internally
                                                                                                        generated cash
                                                                       If an event of default is        flows.
                                                                       continuing a margin step up
                                                                       of 2% applies.                   Commitment
                                                                                                        fee of 1.74% on
                                                                                                        the unused and
                                                                                                        uncancelled
                                                                                                        portion of the
                                                                                                        facility
  Senior Facility                R2,000,000,000.      30 June 2024     JIBAR corresponding to           The facility is
  C                              To discharge                          relevant interest period (of 1   expected to be
                                 existing financial                    month or 3 months) plus a        repaid from
                                 indebtedness                          margin of 5.97% before any       equity capital
                                                                       Margin Step Up Event or a        raise proceeds
                                                                       margin of 11.35% applied         and/or
                                                                       retrospectively from the date    proceeds
                                                                       on which any relevant            received on
                                                                       milestone regarding the          disposals of
                                                                       equity capital raise is not      assets.
                                                                       achieved but only following
                                                                       any Margin Step Up Event.        Interest is
                                                                                                        capitalised.
                                                                       If an event of default is
                                                                       continuing a margin step up      Interest
                                                                       of 2% applies.                   remaining
                                                                                                        unpaid at the
                                                                                                        end of the tenor
                                                                                                        may, at the
                                                                                                        election of the
                                                                                                        Company but
                                                                                                        subject to
                                                                                                        consent of
                                                                                                        lenders, be

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THL Debt Refinancing Announcement_ Final.Docx
                                                                                                             settled by the
                                                                                                             issuance of
                                                                                                             shares in the
                                                                                                             Company.
  Senior Facility                R1,591,880,315.68.     30 June 2024   JIBAR corresponding to            The facility will
  D                              To discharge                          relevant interest period (of 1    be primarily
                                 existing financial                    month or 3 months) plus a         repaid from
                                 indebtedness                          margin of 6.69% before any        proceeds on
                                                                       Margin Step Up Event or a         disposal of
                                                                       margin of 11.06% applied          longer-term
                                                                       retrospectively from the date     strategic
                                                                       on which any relevant             landholdings or
                                                                       milestone regarding the           out of equity
                                                                       equity capital raise is not       capital raise
                                                                       achieved but only following       proceeds to the
                                                                       any Margin Step Up Event.         extent Facility
                                                                                                         C has been
                                                                       In addition to the margin         settled.
                                                                       ratchet provisions following a
                                                                       Margin Step Up Event as           Interest is
                                                                       described above, a margin         capitalised.
                                                                       increase of 2% applies if the
                                                                       Company fails to reach            Interest
                                                                       agreement with the lenders        remaining
                                                                       on the form and content of a      unpaid at the
                                                                       plan for disposal of              end of the tenor
                                                                       properties (with a view to        may, at the
                                                                       repaying Senior Facility D)       election of the
                                                                       by 30 April 2022 (or such         Company but
                                                                       later date as the lenders may     subject to
                                                                       agree to). In this regard the     consent of
                                                                       Company undertakes no             lenders, be
                                                                       later than 31 March 2022 (or      settled by the
                                                                       such later date as the facility   issuance of
                                                                       agent may agree), to deliver      shares in the
                                                                       to the facility agent a           Company.
                                                                       proposal detailing the
                                                                       proposed sale of certain
                                                                       properties.

                                                                       If an event of default is
                                                                       continuing a margin step up
                                                                       of 2% applies.

  Senior                         R300,000,000           30 June 2024   Prime rate plus 2% per
  Overdraft                      (subject to a                         annum initially but thereafter    Interest
  Facility                       seasonal increase                     from the first business day of    serviced from
                                 of the facility limit to              each month the equivalent         internally
                                 R500,000,000                          interest rate under Senior        generated cash
                                 between 1                             Facility B.                       flows.
                                 December and 31
                                 March each                            If an event of default is
                                 financial year). To                   continuing a margin step up       Commitment
                                 discharge existing                    of 2% applies.                    fee of 1.74% on
                                 financial                                                               the unused and
                                 indebtedness and                                                        uncancelled
                                 for general                                                             amount of the
                                 corporate and                                                           facility.
                                 working capital
                                 purposes.

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THL Debt Refinancing Announcement_ Final.Docx
Apart from Senior Facility C and Senior Facility D, where interest cannot be supported by internally
generated cash flows and is capitalised, interest on the above facilities will be paid in accordance
with the selected interest period for each loan from internally generated cash flows derived from the
South African sugar operation, the property business, and dividends, management and operational
support recoveries received from operations in the rest of Africa.

A Margin Step Up Event applies in respect of Senior Facility A, Senior Facility B, Senior Facility C
and Senior Facility D where by 14 April 2022 an equity capital raise for a minimum of R2,000,000,000
or such higher amount as may be required to discharge Senior Facility C plus all accrued but unpaid
interest thereunder has not been implemented and the proceeds thereof applied in repayment of
Senior Facility C.

To the extent that equity capital raise proceeds are insufficient to repay the amount outstanding
under Senior Facility C, or an equity capital raise is not pursued for whatever reason, the Company
will need to progress the disposal (or part disposal) of other assets. An equity capital raise allows
the Company to reduce unsustainable levels of debt while minimising the extent of asset disposals
and keeping the current business largely intact.

The CTA includes the following financial covenants: historic debt service cover ratio, historic interest
service cover ratio, historic leverage ratio, loan to value (LTV) ratio, forecast debt service cover ratio,
forecast interest cover ratio and forecast leverage ratio. The financial covenants are measured on
31 March and 30 September of each year provided that in certain circumstances, where the equity
capital raise is not completed the financial covenants will be measured on a quarterly basis.

The LTV ratio requires that the amounts outstanding under Senior Facility D do not exceed 25% of
the market value of the land portfolio.

Breaches of historical ratios and the LTV ratio is an Event of Default except for such a breach
occurring on the first measurement date ending 31 March 2022.

If a forecast (forward looking ratio) is breached its triggers a requirement to discuss the failure to
meet the covenant and agree remedial actions.

Security in place for the debt facilities first in ranking includes:

• Mortgage bonds registered over immovable properties owned by the Company and its South
African subsidiaries, excluding certain properties where commercial negotiations had been
concluded or were at an advanced stage prior to the refinancing.
• General notarial bonds over movable assets of the Company’s South African businesses.
• Cession and pledge over all shares, claims, insurances, intellectual property, bank accounts and
investments of the Company’s South African businesses.

Notice in terms of section 45(5) of the Companies Act No. 71 of 2008 ("Companies Act")

Notice is hereby given in terms of section 45(5) of the Companies Act that the respective boards of
the obligors (being the Company, Voermol Feeds Proprietary Limited, Tongaat Hulett Sugar South
Africa Limited, Tongaat Hulett Developments Proprietary Limited and Tongaat Hulett Estates
Proprietary Limited) have resolved to provide financial assistance on the basis set out earlier in this
announcement. The resolution of the board of directors of the Company (Board) was passed
pursuant to the authority granted to the Board by the shareholders at the annual general meeting of
the Company held on 10 September 2021.

This notification is required because the financial assistance exceeds one-tenth of 1% of the
Company's net worth.

In accordance with section 45 of the Companies Act, the Board, having considered all reasonably

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foreseeable financial circumstances of the Company and a fair valuation of its assets and liabilities,
is satisfied (i) that immediately after providing the financial assistance, the Company would satisfy
the solvency and liquidity test as defined in the Companies Act and (ii) that the terms of the financial
assistance are fair and reasonable to the Company.

Tongaat
7 December 2021

Sponsor
PSG Capital
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Date: 07-12-2021 08:12:00
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