SINGAPORE: Water treatment firm Hyflux's application for an extended six-month moratorium was given the green light by the High Court on Tuesday (Jun 19), as the company said it is in preliminary talks with more than 20 interested parties for rescue financing of up to S$200 million.
The company is also in discussions with four parties for the divestment of its key asset, the Tuaspring Integrated Water and Power Project, its lawyers from WongPartnership said in court.
Apart from seeking new sources of liquidity and continuing attempts in asset divestments, Hyflux is also mulling a consent solicitation exercise for holders of its notes and perpetual securities.
For this, terms that may be proposed include an extension of the maturity of the notes, a deferment and reduction of coupon payments for both the notes and perpetual securities, as well as a waiver of all defaults that have occurred prior to the proposal of the consent solicitation exercise.
A scheme of arrangement may also be thrown up with terms including a waiver of all defaults or events of default that have occurred prior to the proposal of the scheme of arrangement, and a term out of any liabilities which may have fallen due or accelerated prior to the proposal.
Hyflux is also working with the Securities Investors Association (Singapore) to hold townhall meetings on Jul 19 and 20 at its company headquarters.
In a filing with the SGX late on Tuesday, Hyflux announced that noteholders and investors who bought into its perpetual securities will have their meetings at 12pm and 7pm, respectively, on Jul 19. The meeting for ordinary shareholders will be on the following day at 7pm.
“Hyflux Group has shown that it is in financial difficulty and intends to propose a plan that would shore up its liquidity, improve its asset position and reorganise its obligations so that it can emerge with (a) more manageable debt load,” said its lawyers led by Manoj Pillay Sandrasegara.
According to a Jun 14 affidavit by Hyflux founder and CEO Olivia Lum, the total bank debt for the entire Hyflux Group stands at about S$1.84 billion with subordinated debt of S$900 million. The latter includes S$400 million of preference shares and S$500 million of perpetual securities issued. This excludes the medium-term notes totalling S$265 million.
The statement submitted to court as part of Hyflux’s case for a moratorium extension also included details on the company’s attempt to secure “rescue financing in the region of S$200 million”.
Ms Lum said this could be utilised for the construction costs of ongoing projects, including the TuasOne waste-to-energy (WTE) project, and for the group to continue to secure new projects for the future.
At present, non-disclosure agreements (NDAs) are being negotiated with more than 20 interested potential rescue financiers and strategic investors, with another seven having executed these NDAs.
The NDAs will form the basis for initial discussions and access to a limited data room, said Ms Lum. If these potential rescue financiers are interested in pursuing a concrete arrangement, the parties will proceed to a more advanced stage of discussions where more documents and information will be released.
RUNNING OUT OF CASH
The court hearing on Tuesday comes after Hyflux and five of its subsidiaries on May 22 applied to the High Court to begin a reorganisation of its debt and businesses.
In a statement, it cited “prolonged weakness” in Singapore’s power market for its financial woes, leading to “short-term liquidity constraints”.
The homegrown firm, which first made its mark in water treatment and later ventured into power generation, had described the move to seek court protection from creditors as necessary to “protect its operations while it seeks to reorganise its businesses and liabilities”. The application to court automatically gives it a 30-day moratorium.
In laying out its case for an extended six-month moratorium against creditors, Hyflux’s lawyers mentioned the company could “run out of available cash in four to five weeks”.
The arguments put forth also include the need for extra time to divest its key assets, such as Tuaspring which has “significant value” and should not be rushed into a sale, its lawyers said.
A short runway with repeated applications for extensions will also create uncertainty and discourage third-party financiers from supporting the company, they added.
An extension of six months will also give the company “a strong platform” to properly engage its diverse stakeholders, which include banks, trade creditors, as well as 34,000 holders of preference shares and perpetual securities.
But it was not all without objections. Lawyers representing some of Hyflux’s biggest creditors argued that the water treatment specialist should not be extended a six-month moratorium.
Representing Mizuho, a lawyer from TSMP Law Corporation said a moratorium of two to three months will be “reasonable” for Hyflux to engage its various stakeholders and come up with more detailed solutions. Mizuho is Hyflux’s second biggest creditor, holding approximately S$235.2 million of debt.
KFW IPEX-Bank also supported a shorter moratorium, with a lawyer from Cavenagh Law noting that the bank might support an extension if it sees “genuine progress”.
At the end of the two-hour-long hearing, the court granted Hyflux with an extension of a six-month moratorium but ordered the company to provide an update of its reorganisation plans at the three-month mark and hold a status conference two weeks after that.
WE WANT ANSWERS: RETAIL INVESTOR
The recent troubles at Hyflux have caught many mom-and-pop investors off guard, with the company’s shares and related securities being halted from trading since May 21.
The SGX-listed counter last changed hands at S$0.21 on May 18 before the trading halt. Year to date, it has fallen 45 per cent.
A handful of retail investors attended the court hearing on Tuesday. One of them was Mr Martin Lee who holds Hyflux’s preference shares, perpetual securities and ordinary shares.
“I’m here to see how it goes and what’s the outcome of this,” he told Channel NewsAsia, while adding that the company’s financial situation has been unexpected for many retail investors like him.
Commenting on the townhall meeting that Hyflux is aiming to hold for investors, he said: “There’s a lot of uncertainty and we want answers.”