Embattled water treatment firm Hyflux could get a $400 million lifeline from UAE utilities provider Utico FZC for “equity and working capital purposes and possible urgent interim funding”, the company said in an SGX announcement late on Friday.
The offer comes just weeks before Hyflux’s debt moratorium is set to expire on May 24, and ahead of a pivotal High Court hearing on Tuesday on whether a group of seven unsecured banks – which collectively are owed $648.7 million – will be allowed to start an action for judicial management.
If a carve-out is approved, these banks plan to file applications for Hyflux and Hydrochem Singapore – its engineering, procurement and construction business – to be placed under judicial management. The applications are scheduled to be heard on May 13.
Mr Eddee Ng, senior partner at Tan Kok Quan Partnership, who represents the group of banks, said they are seeking to replace the current Hyflux management with a judicial manager as they have “lost confidence in the management and board to run the restructuring process, which they say has ‘gone all over the place’ in the last 10 months”.
But Hyflux founder Olivia Lum is still fighting to turn the company around. In a bid to buy time, Hyflux announced on April 25 that it received a non-binding letter of intent for a $400 million injection from an owner and developer of water and power utilities based in the Middle East.
Late on Friday, Utico FZC, the largest private utilities provider in the United Arab Emirates, was revealed as the mystery investor.
Hyflux said its legal and financial advisers are in active discussions with Utico’s team on terms of its investment, to be set out in a binding term sheet for execution.
Utico has informed Hyflux that it is “aware of the urgency of the restructuring” and that it intends to invest in the group and help preserve its key entities so that they remain intact and operational, Hyflux said.
Utico has informed Hyflux that it is “aware of the urgency of the restructuring” and that it intends to invest in the group and help preserve its key entities so that they remain intact and operational, Hyflux said.
The UAE utilities group – whose shareholders and investors include sovereign institutions of the governments of Oman, Saudi Arabia, Bahrain and Brunei – plans to retain Hyflux’s current management, and to “reach an amicable deal with the group’s creditors and investors”.
Hyflux’s attempt at restructuring $2.95 billion in total debt – one of the largest such cases in Singapore in recent years – hit the skids on April 4 when it aborted a $530 million rescue plan with Salim-Medco consortium SM Investments (SMI).
The company cancelled a vote by junior creditors scheduled for the following day on the rescue plan by the Indonesian group. Some observers believe the SMI offer was doomed to fail because the retail perpetual and preference shareholders, who are owed about $900 million, would have been forced to accept deep haircuts.
The divorce has turned sour with both Hyflux and SMI now suing each other to claim a $38.9 million deposit by SMI in an escrow account.
Veteran restructuring expert Nicky Tan from nTan Corporate Advisory told The Sunday Times yesterday: “Hyflux is negotiating to retain a meaningful stake in the assets and businesses of the group, so that hopefully over time, value will accrue to the retail perps and preference share investors, who will be kept whole in Hyflux’s books, and not subject to take any haircuts.”
Hyflux on Friday said it is also in concurrent discussions with several other parties. These include a sovereign fund based in the Persian Gulf and in North Africa as well as an Australian investment fund. The High Court on April 25 extended a reprieve from creditors to Hyflux and its three subsidiaries until May 24 as the company works on two possible plans to avoid liquidation.
