SINGAPORE (Apr 29): Debt-laden water company Hyflux has been given a month’s extension on its debt moratorium, instead of the three months it applied for.
Justice Aedit Abdullah noted that the debt moratorium, which affords Hyflux protection from creditors as it finds a solution to its woes, was first given nearly a year ago. It was meant to provide the company with “breathing space” and not to “continue indefinitely”, he said on April 25.
Hyflux had until April 30 to get its restructuring plan approved but things fell apart over the last two months. The company’s ties with white knight SM Investments turned acrimonious after the rescue agreement fell through. Both parties are now threatening to sue each other.
Hyflux now has up to May 24 to put forward a plan to avoid liquidation. The company can make further extensions at two subsequent hearings, though the chances of obtaining one are slim. A “carve-out” hearing filed by senior unsecured creditors seeking judicial management (JM) is expected to be held on May 7. If successful, the JM application hearing is expected to be held on May 13.
At the April 25 hearing, the company’s lawyer, Manoj Pillay Sandrasegara of WongPartnership, said the extra time was crucial. The company now has two possible plans to firm up and offer to creditors and investors.
In an April 25 SGX filing just before proceedings began, Hyflux said it had a non-binding letter of intent (LOI) from an unnamed Middle East-based utilities company to invest $400 million in the company. By contrast, the scuttled deal with SMI promised funding of $530 million.
The second plan, meanwhile, entails transferring Hyflux’s ongoing projects and assets to a special-purpose vehicle that will be wholly-owned by the company, says Sandrasegara. Shares of the SPV will be pledged to senior unsecured creditors via a scheme in exchange for partial retirement of the senior unsecured debt, according to Hyflux founder Olivia Lum in an April 23 affidavit.
However, a group of unsecured banks was granted leave by Justice Aedit to file applications for Hyflux and a subsidiary to be placed under JM and/or interim JM. They are Mizuho Bank, KfW IPEX-Bank, Bangkok Bank, BNP Paribas, CTBC Bank, Korea Development Bank and Korea Development Bank, Singapore Branch.
Eddee Ng, senior partner at Tan Kok Quan Partnership, argued on behalf of the banks that the 10-month restructuring had “gone all over the place”, with little to show except for the non-binding LOI. This, he said, marked a lack of transparency. “As far as we know, these plans remain nothing more than hypothetical scenarios and we should call them as such.”
At the heart of Hyflux’s debt woes is its ambitious Tuaspring project. The desalination and power plant was supposed to generate revenue by selling excess power to the Singapore electricity grid. However, when energy market policies changed, prices fell and the plant lost money. Consequently, Hyflux could not redeem the various tranches of perpetual securities and other debt instruments it had issued since 2011.
On April 17, the Public Utilities Board (PUB) announced plans to take over the plant in 30 days. The national water agency, which has a contract to buy desalinated water from Hyflux, says Tuaspring was not performing reliably.
PUB’s announcement prompted Maybank, Tuaspring’s single largest creditor, to file to take over the power-generating portion of the plant. In an April 23 letter, Maybank asked Hyflux to repay within seven days sums of $509.1 million and US$44.5 million.
On April 16, the Monetary Authority of Singapore, the Accounting and Corporate Regulatory Authority and Singapore Exchange Regulation said they were reviewing if Hyflux had complied with disclosure requirements, as well as accounting and auditing standards.
