SINGAPORE: Embattled Hyflux has secured two more months of reprieve from its creditors, as the Singapore High Court on Monday (Sep 30) extended its debt moratorium to Dec 2.
With its existing moratorium due to expire on Monday, the debt-laden water treatment firm had applied to the court for the sixth time to let it prolong its search for a rescue investor as it tries to return to solvency.
In making the case for an extension, Hyflux’s legal adviser told the court that negotiations with United Arab Emirates utility firm Utico "have not stalled" and the company will prioritise the conclusion of a deal.
“I’m pretty optimistic that actually within two to three weeks, we should be able to close something with them,” said Mr Manoj Sandrasegara from WongPartnership, when asked by Justice Aedit Abdullah for the likelihood of a deal being closed over the next two months.
Hyflux said it is open to discussions with other potential investors and its advisers on Monday submitted a letter it had received from lawyers representing an unnamed interested party.
The company has made “significant progress” in its discussions with the various stakeholder representative groups, the court heard.
According to Mr Sandrasegara, Hyflux has obtained an “in-principle buy-in” on the commercial terms of a scheme of arrangement from senior unsecured creditors. These terms were not disclosed in court.
However, there remains one “open-ended issue” that the company is seeking more time to resolve.
“While the senior creditors are quite comfortable with the initial sums they will receive, one point that concerned them was the source of funds – how this money or when the money (will) be paid to them,” said Mr Sandrasegara.
“That is an open-ended issue that Hyflux felt (it) needed more time to discuss with Utico, but we really ran out of time given that the moratorium was going to expire.”
During Monday's hearing, the company also provided updates on two major developments.
The first was about its TuasOne project, which is set to be Singapore’s sixth waste-to-energy plant. It has seen some delays in completion amid Hyflux’s financial woes.
According to Mr Sandrasegara, Hyflux and its joint venture partner Mitsubishi Heavy Industries (MHI) have reached a new non-binding term sheet, which paves the way for a “novation” of the project to MHI.
“(This) means that MHI will take over the project through completion and under the novation, MHI is responsible to complete the TuasOne project,” added the legal adviser, noting that the National Environment Agency (NEA) and lenders to the TuasOne project are supportive of this new development.
All parties are now working out the relevant legal documentation. “We see that as quite positive to move things along,” said Mr Sandrasegara.
READ: Hyflux’s waste-to-energy project in Tuas ‘closely’ monitored by NEA as firm’s restructuring drags on
The other development was about the substantial realisation of receivables under an arbitration awarded to Hyflux last year.
“Hyflux group has been able to negotiate a settlement with a counterparty in an arbitration issued in favour of Hyflux in 2018. Now Hyflux has substantially realised the receivable due to it,” Mr Sandrasegara said.
He stopped short at the details, but cited from founder-CEO Olivia Lum’s latest affidavit that the amount received is “substantial and will improve cashflow tremendously”.
Negotiations are ongoing on the use of these proceeds, the court heard.
During Monday's hearing, there was little objection from lawyers representing other creditor groups to Hyflux’s request for a moratorium extension,except for Mr Eddee Ng from Tan Kok Quan Partnership, who represents a group of banks.
The lenders were "unable to support the extension" due to concerns over costs and the lack of updates as the restructuring has dragged on for more than a year, the court was told.
The judge granted the two-month moratorium extension but asked for Hyflux to return to court for a case management conference at 10 am on Oct 31. Another hearing is scheduled for Nov 29.
READ: From making waves to drowning in red ink: Hyflux, Tuaspring and how a business giant came undone
Since embarking on a court-supervised process to reorganise its business and liabilities last May, Hyflux's restructuring journey has been marked by several twists and turns.
It had reached a deal with Indonesian consortium SM Investments last October, but that arrangement fell through in April.
Hyflux then began negotiations with other potential investors, including Utico, which said it is willing to 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.
Last week, the Emirati utility firm said it will support “any extension” in Hyflux’s debt moratorium, only if the move is “not prejudiced” towards creditors or retail investors.