SINGAPORE: Hyflux is engaging with potential white knights overseas for a new restructuring deal worth S$400 million, said the embattled water treatment firm in a filing to the Singapore Exchange on Thursday (Apr 25).
According to Hyflux, it has received a non-binding letter of intent from one such party - a developer and owner of water and power utilities based in the Middle East with a “reputable track record”.
Hyflux said the possible injection of S$400 million will be used for equity and working capital purposes and possible urgent interim funding.
According to the SGX filing, a group of unsecured banks comprising Mizuho Bank, KfW IPEX-Bank, Bangkok Bank, BNP Paribas, CTBC Bank, The Korea Development Bank and the Korea Development Bank, Singapore Branch applied to the Singapore High Court on Wednesday for Hyflux and Hydrochem to be placed under judicial management and/or interim judicial management.
This comes after the restructuring agreement between Hyflux and its would-be white knight SM Investments was scrapped earlier this month.
Mr Edward Tay, a partner with Continental Law, said a loss in confidence in Hyflux's current management could be a reason the banks initiated this move.
"The unsecured banks feel that the Hyflux's assets will be better protected by having a professional judicial manager managing the company, rather than having a company continue to be managed by its board of directors," said Mr Tay.
"And perhaps maybe even the judicial manager will get a deal which is better than the S$400 million, which the current management is proposing."
Investor advocacy group Securities Investors Association (Singapore) president David Gerald has again called for Hyflux CEO Olivia Lum to step down.
"We have called on Olivia Lum long ago to step down because the company failed under her leadership, and for stakeholders to have trust, there must be a change in the chairmanship, management. The same people trying to do new things cast doubts in the minds of investors," Mr Gerald said.
"On the interim basis, there are people on the board who can step in and provide new leadership, and in the meantime, they need to look for someone with expertise in the water business. Someone who knows the business, can lead the company and steer the company to success."
But Mr Gerald said stakeholders are concerned about the escalating professional fees and advisers' expenses Hyflux has to pay.
Echoing Mr Gerald's view was NUS Business School Associate Professor Lawrence Loh.
"The cash burn is obviously a key concern but if you don't put in anything now, you might be losing much more," said Assoc Prof Loh.
"So the little part where they pay for some of the advisory services, you cannot see them in isolation, probably they may be able to unlock further values."
EXTENSION TO DEBT MORATORIUM
The Singapore High Court on Thursday granted Hyflux a one-month extension to its debt moratorium until May 24, just days before its court-sanctioned protection from creditors expires on Apr 30.
Hyflux had originally requested for a three-month extension.
During the hearing, Hyflux lawyer Manoj Sandrasegara said the company might need a maximum of about seven to eight months of extension to execute and complete the restructuring plan.
Justice Aedit Abdullah said that a debt moratorium is "not meant to continue indefinitely" but meant to "give the company breathing space".
Arguments for a further extension of the debt moratorium can be made on either May 7 or May 13.
The group of unsecured banks seeking judicial management for Hyflux and Hydrochem will have its application heard by the Singapore High Court on May 7.
If that application is approved by the court, the judicial management hearing will take place on May 13.