Full of debt, Tongaat limps along on the road to anywhere
Impossible not to feel foreboding when Tongaat said it is negotiating a standstill agreement with its banks
Just a week after Steinhoff released its much-anticipated 2017 annual report, it was impossible not to feel foreboding when Tongaat announced it is negotiating a standstill agreement with its banks.
The issues plaguing Tongaat are in no way as formidable as those at Steinhoff, but there are indications that Tongaat’s communication with the outside world is not everything it is cracked up to be. How else can you explain the shock that appears to have greeted the cascade of grim news out of the group since former CEO Peter Staude left last October? A shock best revealed in the collapse of the share price.
It must be a tad embarrassing for investment analysts who awarded Tongaat the prize for best communicator on the JSE at a ceremony last June.It must also cause discomfort to the banks and investors who might have been encouraged by the “multiple regular meetings” between themselves and the CEO, CFO and key executives referred to in Tongaat’s 2018 annual report.And then there’s the board. To outsiders the details of the board members must have encouraged all sorts of great expectations, or at the very least the presumption that the company was in good hands. All had extensive experience in industries both local and international and most had impressive academic qualifications.
Now, with a rights issue seeming inevitable, it is possible the banks will emerge as substantial shareholders in this once solid blue-chip company. Nedbank and RMB are each already owners of 9.07% stakes courtesy of the unwound broad-based BBEE transaction; if their lending operations are exposed they might end up picking up more equity in exchange for their debt.The good news is that analysts are at least talking in terms of a Tongaat rights issue. No one would even suggest a Steinhoff rights issue.