SINGAPORE: Singapore water treatment firm Hyflux, whose earnings have taken a hit from "prolonged weakness" in the local power market, has applied to the High Court to commence a court-supervised process to reorganise its liabilities and businesses, the company said on Tuesday (May 22).
Among other things, the company has sought a moratorium that will prevent it from being wound up.
The company, whose landmark Tuaspring project was the first integrated water and power project in Asia, marked its first full year of losses in 2017. The company also reported losses in the first quarter of 2018.
The weak results come on the back of an oversupply of gas in the Singapore market, which has resulted in depressed electricity prices.
Prolonged weakness in the local power market has led to "increasing strain on the Group’s finances, resulting in short-term liquidity constraints in recent weeks", the company said in a statement.
"This has been compounded by restrictions on the repatriation of monies into Singapore from projects overseas, as well as increasing amounts having to be placed in fixed deposit accounts as a requirement for performance bonds to be issued or renewed in support of the existing projects," it added.
Hyflux, which was worth nearly S$2.1 billion at its peak in late 2010, now has a market value of S$165 million, according to Bloomberg.
The company's share price has plunged 44 per cent so far this year. It closed at S$0.21 on May 18 before it halted trading ahead of the announcement, compared with S$0.375 at the end of 2017.
In a separate letter to stakeholders, Group CEO Olivia Lum said that the move to apply for court supervision was necessary not only to protect the company's viable core businesses, but also position it for long-term sustainable growth.
"In view of the challenging environment, our options are to either maintain the status quo and hope to ride out the storm, or to step back and assess holistically how to reorganise our liabilities," she wrote.
"We have therefore decided to be proactive ... (and) commenced a court-supervised liabilities reorganisation exercise for certain entities within the Group," she added.
The main objective of the exercise is to provide the space and time for the group to focus on its ongoing discussions with strategic investors, optimise operations, target areas for growth and complete outstanding projects in order to keep generating steady cash flow, she said.
"Through this exercise, we believe that we will emerge stronger and be poised for sustainable growth in the years to come," she said.
Among other things, Hyflux has sought a moratorium preventing potential proceedings against it in Singapore for six months. The moratorium also seeks to prevent legal action against any of its properties.
The moratorium will be in effect for 30 days, during which no order may be made and no resolution may be passed for it to be wound up, it said.
"The company is taking this step in order to protect the value of its businesses while it reorganises its liabilities," Hyflux said in the statement.
As part of the reorganisation process, the board will only make payments critical to the continued operation of the group's businesses.
As such, payment of distribution on its S$500 million, 6 per cent Perpetual Capital Securities, due May 28, will not be made, it said.
Hyflux, which suspended trading on May 21, has engaged WongPartnership as legal advisors and Ernst & Young Solutions as financial advisors.