SINGAPORE (June 3): Embattled water treatment company Hyflux has won yet another reprieve, albeit a brief one, as its debt moratorium has been extended to Aug 2. The company had applied to the courts for a four-month extension on the moratorium, which was due to expire on May 29.
“I will be amenable, if progress continues to be made, to a further two-month extension,” said Judge Aedit Abdullah on May 29, referring to a further extension of the protection beyond Aug 2.
Hyflux is under intense pressure from creditors, including some 34,000 individuals who are looking to recover about $900 million in investments. The company is weighed down by a debt load of $2.95 billion, and faces possible probes by regulators into its stock market-related disclosures, as well as its compliance with accounting and auditing standards.
Hyflux’s single-largest creditor is Maybank. On April 23, it received a letter of demand from the bank to “immediately” repay $509.1 million drawn down under term loan facilities and a US$44.5 million ($60.6 million) cash cover for contingent liabilities, as well as interest and legal costs.
Troubles at the company, once a high-flying Singapore brand, can be traced back to 2011, when it won the government contract to build Tuaspring, which was to be Singapore’s largest desalination facility, combined with a power plant.
Hyflux financed the project mainly with debt — the equity portion of its loans was raised through the issue of preference shares and perpetual securities that carried dividend and coupon rates of between 4.8% and 6%.
However, when changes to the energy market policies were implemented, electricity prices started to fall and Tuaspring, which began operations only in late 2016, began to lose money. Hyflux’s balance sheet came under pressure and, finally, in May last year, it sought court protection against its creditors.
In October, Hyflux managed to secure a “white knight” — an Indonesian consortium fronted by palm oil tycoon Antoni Salim, which agreed to pay $400 million for a 60% stake in the company and provide another $130 million in a loan.
But that deal fell through in April amid protests from minority shareholders and creditors. Both parties are suing each other for not living up to the agreement.
The matter was compounded on April 17 when national water agency PUB said it would nationalise Tuaspring to safeguard Singapore’s water security, at zero dollars. PUB has taken over the plant and hired 90% of the workers at the plant who used to be employed by Hyflux.
In recent weeks, Hyflux has received letters of intent from other investors, including UAE-based utility company Utico and Oyster Bay Fund.
According to a May 27 affidavit by CEO Olivia Lum, Hyflux has been in active discussions with four potential investors. The company prefers investors who are looking at taking over the group as a whole, Lum says.
Utico is offering Hyflux’s retail investors a part-cash redemption, “and also a hope for full redemption with a plan and exit option”, according to its CEO Richard Menezes.
Yet, things look to be far from settled, even as the clock ticks on Lum’s ability to keep Hyflux from failing. Utico has given the company until June 17 to sign a binding agreement. Meanwhile, Oyster Bay said its letter of intent would automatically terminate if a judicial manager or liquidator is appointed over the company.
The court has also ordered Hyflux to give its creditors monthly updates on its cash flow.
