Hyflux is ‘leaking value’ and has to ‘act without delay’ to pick an investor: UAE suitor Utico
SINGAPORE: Time is running out for Hyflux with its assets “leaking value” and the water treatment firm needs to “act without delay” in deciding on an investor, said its suitor from the United Arab Emirates on Wednesday (Aug 14).
Clarifying earlier confusion surrounding the deadline that Hyflux has to consider its offer, Emirati utility firm Utico said 5pm on Aug 16 will be the “milestone” by which it expects Hyflux to announce its choice of an investor.
This announcement should "also include structure" as it impacts Hyflux's valuation and risks, it added.
“This is necessary since all Hyflux assets and EPC (engineering, procurement and construction contractor) contracts are leaking value due to delays and hence an 'in time' deal is imperative, leading to bonafide action protecting Hyflux’s worth for creditors and investors,” said Utico.
If another investor is “clearly named with structure and value” by Aug 16, Utico said it could “change its offer for whatever value is left”.
But if it is picked as the preferred bidder, a deal must be signed by Aug 26, the statement added.
Utico signalled its interest in Hyflux as early as May and around mid-July, agreed to take an 88 per cent equity stake in the distressed home-grown firm for S$300 million as equity and S$100 million as a shareholder loan.
It also said it intends to offer the cash equivalent of a 4 per cent stake in the enlarged Utico group, plus additional cash to the holders of Hyflux preference shares and perpetual securities (PNP).
Since then, however, both parties have not agreed on a binding agreement.
Meanwhile, Hyflux announced that it was in talks with at least six other suitors and had received separate non-binding letters of intent for investments from global multi-strategy investment fund Oyster Bay Fund and an unnamed China-based suitor.
Along the way, it secured its fifth debt moratorium extension, which prevents creditors from taking actions against it until Sep 30.
"DELAYING PLOY" FROM HYFLUX
In a sign of waning patience, Utico described the announcements of non-binding letters of intent from the various investors as “a delaying ploy with intent to lose Hyflux valuation and assets/contracts”.
It added in its statement that its board of directors are “concerned that Hyflux and its advisors are not facilitating nor informing the public of the factual situation.”
“Instead they are asking the court for more time as much as four months (as in the Aug 2 hearing) to extend their fees but when this time is eroding value for investors, creditors, PNP and all other stakeholders” the statement added.
Utico mentioned how it has offered funding for Hyflux’s TuasOne waste-to-energy project in Singapore and the Qurayyat independent water project in Oman.
But in the case of TuasOne, Hyflux and its partner Mitsubishi Heavy Industries “are acting in such a way ignoring Utico proposal to infuse funds by next month”, the statement cited its CEO Richard Menezes as saying.
“There seems to be a different agenda for Hyflux Board and its advisors which is confusing Utico,” added Mr Menezes.
READ: Hyflux’s waste-to-energy project in Tuas ‘closely’ monitored by NEA as firm’s restructuring drags on
And for the project in Oman, Utico said a default situation is being prolonged with "Hyflux and the SPV (special purpose vehicle) management acting lethargically and illogically".
The current situation needs the Hyflux board “to act without delay,” Utico said, adding that the board has “fiduciary and legal responsibility to take the best decision and measures for the long-term success of the company and remove it from its current situation without losing further valuation loss”.
Utico also said that it has agreed to "a break fee both ways" or an entry fee if Hyflux wants to get a new bidder until Aug 26.
It added that it hopes Aug 16 and Aug 26, with the latter being its long-stop date to sign an agreement, will be met by Hyflux.
CNA has reached out to Hyflux for comments.