Tongaat Hulett Limited (JSE:TON) News - 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 -2- 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. -3- 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 -4- THL Debt Refinancing Announcement_ Final.Docx 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 -5- THL Debt Refinancing Announcement_ Final.Docx Date: 07-12-2021 08:12:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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