Hyflux and directors under criminal investigation for suspected false and misleading statements

SINGAPORE: Authorities have launched a joint investigation into Hyflux and its current and former directors for suspected false statements and disclosure requirement breaches, as well as potential non-compliance with accounting standards.

In a joint statement on Tuesday (Jun 2), the police's Commercial Affairs Department (CAD), the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) said the investigation follows a more than year-long review of Hyflux-related disclosure, and compliance with accounting and auditing standards.

ACRA, MAS and the Singapore Exchange Regulation started a review in April last year to see if Hyflux had breached any regulations. 

The review disclosed reasons to suspect that offences may have been committed. 

"The investigation will ascertain whether there were lapses in Hyflux’s disclosures concerning the Tuaspring Integrated Water and Power Project (Tuaspring IWPP), as well as non-compliance with accounting standards between 2011 and 2018," the statement said.

CAD, MAS and ACRA have also obtained accounting and other corporate records from the firm and its subsidary, Tuaspring, as part of the investigation. 

Hyflux's directors and key officers involved in the Tuaspring IWPP have also been interviewed by the authorities. 

The authorities said the review by the regulators was an "extensive exercise covering the announcements and financial statements issued by Hyflux a period of eight years between 2011 and 2018 inclusive".

"The current investigation was launched as soon as the review was completed, as the review disclosed reason to suspect that offences had been committed," they said.

On how long the investigation would take, CAD, MAS and ACRA said the time needed to complete the investigation depends on factors such as the offence period and complexity of issues. An update will be provided when an outcome is available.

In a bourse filing on Tuesday evening, Hyflux said it has received a notice from authorities requiring it to provide certain information and documents in relation to the Tuaspring desalination plant.

"The company is presently assisting and will cooperate fully with CAD in its investigations," it said, adding that it will make further announcements as and when there are any updates.

According to the company’s website, its current board of directors are founder-CEO Olivia Lum, lead independent director Teo Kiang Kok, as well as five other non-executive independent directors Gay Chee Cheong, Lee Joo Hai, Christopher Murugasu, Lau Wing Tat and Gary Kee.

Six of them, with the exception of Mr Lau, served on the board between 2011 and 2018. Mr Lau was appointed to the board in July 2014, replacing Mr Rajsekar Kuppuswami Mitta who left the board in 2012 after having served as non-executive independent director since April 2007.

Mr Simon Tay, who joined the board in May 2011, also served as non-executive independent director of the company until his resignation on Feb 7 this year.

When asked to confirm the directors who were under investigation, the police said they were "unable to confirm ... as investigation matters are confidential".

READ: Hyflux independent director resigns due to ‘unresolved differences’ over legal team change

This marks the latest twist in events surrounding Hyflux’s high-profile debt restructuring attempt which started in May 2018 and has since been marked by unexpected developments, including a public protest by angry retail investors and national water agency PUB seizing control of the Tuaspring desalination plant last May.

Hyflux's fate appears to be hanging in the balance again after it said on May 30 that its S$400 million rescue deal with Middle Eastern suitor Utico has "ceased". 

It added that it is considering other investors, including little-known Aqua Munda which came up with an offer in December last year to purchase about S$1.8 billion worth of Hyflux’s debt.

READ: COVID-19: Hyflux gets green light from High Court to postpone scheme meetings, extend debt moratorium

READ: Hyflux says deal with Utico has ‘ceased’; studying revised offer and pursuing other investor options

Aqua Munda said on Tuesday that it remains interested in acquiring the senior unsecured debts, as well as the preference shares and perpetual securities of Hyflux.

However, recent global market developments, including the COVID-19 pandemic, have "necessitated a re-assessment on Aqua Munda’s part on what would be an acceptable and sensible pricing for the secondary market purchase of the unsecured debts".

"We can confirm that appropriate funding arrangements are in place and, barring unforeseen circumstances, we expect to secure a significant tranche of the unsecured debts shortly," it said in a letter addressed to Ms Lum and the company's board.

Adding that it is committed to helping Hyflux complete its debt restructuring "as soon as practicable", the potential suitor said it is ready to provide up to S$10 million of cash funding for Hyflux's ongoing operational costs and other working capital needs "by way of loan or otherwise on terms and conditions to be mutually agreed" if the embattled water treatment firm secures a further extension of its debt moratorium.

Hyflux's moratorium, which grants it reprieve from creditors, will expire end-July. Its next case management conference is scheduled at 10am on Jun 11. 

READ: From making waves to drowning in red ink: Hyflux, Tuaspring and how a business giant came undone

Authorities said Hyflux's ongoing reorganisation process will not be affected by the criminal investigation.

"The investigations are not intended to interfere with Hyflux’s current reorganisation plans as they focus on determining the role of the subjects in the alleged disclosure lapses and non-compliance with accounting standards between 2011 and 2018," they added.