SINGAPORE: United Arab Emirates utility firm Utico has given distressed water treatment firm Hyflux two more weeks to consider its S$400 million investment offer and sign a “definitive agreement”.
The deadline is now Aug 16, "failing which, they will walk", WongPartnership lawyer Manoj Sandrasegara, who represents Hyflux, told the Singapore High Court during a case management conference on Friday (Aug 2).
The debt-laden firm, which has been under a court-supervised restructuring for more than a year now, was back in court as it sought another extension of its debt moratorium.
Speaking to reporters after the court hearing, Utico’s chief executive Richard Menezes said the company “reserve(s) the right” to walk away if a deal is not signed within two working weeks.
“But where we are standing now, we are just a millimetre away from signing. It depends on them,” he added.
Utico, which first signalled its interest in Hyflux back in May, announced the details of its S$400 million investment offer last month.
In the joint statement with Hyflux on Jul 11, both parties said they were “progressing” towards a deal that would see Utico take an 88 per cent equity stake in Hyflux for S$300 million as equity and S$100 million as a shareholder loan.
Utico 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.
Over the last four weeks, Utico’s representatives have flown into Singapore at least three times to hold discussions with various stakeholder groups, according to Mr Sandrasegara.
“All stakeholder groups are engaging directly with Utico,” the lawyer said in court, adding that this is a different approach to the deal-making process with Indonesian consortium SM Investments, where Hyflux signed an agreement first before ironing out allocation details. That deal has since been called off.
Confirming that, Mr Menezes said he met with Hyflux’s perpetual securities and preference shareholders for the first time on Thursday evening.
During the three-hour meeting, Utico outlined two options for these retail investors.
“Option one is a cash-out and option two is a way forward in the next two years, which means when Utico lists, they get a certain share of securities,” the chief executive added in response to CNA’s questions.
Noting that more details will be released by the Securities Investors Association Singapore (SIAS) which helped organised the session, Mr Menezes said: “I can only say that at the end of the meeting, there was applause.”
Mr Menezes also had a meeting with the National Environment Agency (NEA) on Friday morning over the TuasOne waste-to-energy plant project.
Describing it as Hyflux's “crown jewel”, the project “needs more money next month”, added the Utico chief executive.
“We met NEA today in the morning and NEA has said that they will support it as long as there is funding for next month. (Hyflux is) running out of funds at the project level … and there was talk about who will pay for the flood lights.”
CNA has reached out to NEA for comments on the financial situation of TuasOne.
As to why talks have taken so long, Mr Menezes cited fees for Hyflux’s professional advisers as among the remaining sticking points.
“The longer it takes, the fees will go up,” he told reporters.
There are also disagreements with Hyflux’s unsecured working group of financial creditors over some commercial terms of the restructuring, although he noted that “the deal is agreed, except some language, monitoring and reporting structure”.
READ: From making waves to drowning in red ink: Hyflux, Tuaspring and how a business giant came undone
Founded in 1989, Hyflux made a name for itself with its proprietary membrane technology and was regarded one of Singapore’s most successful business stories, before a heavy reliance on borrowing and a failed venture into power generation hurt its finances.
The mainboard-listed firm sought court protection to reorganise its business and obligations last May.
Since then, its restructuring journey has been marked by twists and turns, including a rare public protest by retail investors and the sudden abortion of a deal with would-be white knight SM Investments in April.
As it continues its search for a new rescue investor to meet billions in liabilities, Hyflux sought for yet another extension of its debt moratorium on Friday.
It was hoping for a prolonged reprieve from creditors until the end of November, but was granted just two months. It now has until Sep 30 to work out a turnaround plan.
This marks the fifth extension of Hyflux’s debt moratorium, which restricts creditors from taking actions against the company.
READ: ‘We have not lost faith’: Hundreds of Hyflux investors gather to express concerns at Hong Lim Park
The unsecured working group made up of eight banks voiced its objections again on Friday, with Tan Kok Quan Partnership lawyer Eddee Ng arguing for the moratorium to be extended by two weeks only.
A two-week extension “nicely ties in” with the deadline issued by Utico, said Mr Ng in making his case, adding that it would be “an opportune time for parties to return back to court" to provide updates.
RBC Investor Services Trust Singapore, the trustee of ESR-Reit, also objected to a long moratorium extension on the basis that Hyflux “has been unilaterally reducing” its payable rent at Tuas Hub in recent months.
“They have done so by abandoning premises within Tuas Hub without agreement with the landlord, and then proceeding to reduce the rent payable for the premises,” the court heard.
“There is no basis for such reduced rent (as) we are providing ongoing services to Hyflux."
Justice Aedit on Friday repeatedly stressed that Hyflux will need to present “something concrete” by September, otherwise he might “pull the plug”.
“I appreciate the difficulties but a moratorium is not meant to allow a company to carry on indefinitely.”
In making the decision, he concluded: “I do expect to see more definitive agreements … before the next hearing date. If neither occurs, I would see that would be difficult for me to extend any further but I will take the arguments at that point.”