SINGAPORE: Hyflux on Thursday (Apr 4) cancelled a restructuring agreement with the Salim-Medco consortium SM Investments (SMI), saying it has "no confidence" the Indonesian investor will complete the deal.
Hyflux said it "attempted on multiple occasions to meaningfully engage with SMI on its assertions on the restructuring agreement" to no avail.
It added: "In light of (SMI's) responses and conduct, Hyflux has no confidence that the investor is prepared to continue to complete the proposed SMI Investment, even if all outstanding conditions precedent under the Restructuring Agreement are fulfilled."
This follows developments from last week, when SMI said it was reviewing the sums that should be set aside for Hyflux’s working capital needs and to settle creditors’ claims, in light of “new material information” on the embattled water treatment firm.
The Indonesian consortium did not specify what the new information is, but said that it “significantly increases” the working capital requirements of Hyflux group.
In light of the latest events, Hyflux has cancelled scheme meetings scheduled for Apr 5 and Apr 8, as well as the Extraordinary General meeting set for Apr 15.
"SURPRISED BY ACTION TAKEN BY HYFLUX": SMI
SMI released a statement on Thursday saying it was "surprised" by Hyflux's move to terminate the agreement.
"(SMI) is surprised by the action taken by Hyflux," the consortium said. "SMI has been waiting for Hyflux to disclose further material information following multiple requests for such disclosure.
"The delay in disclosing this material information has prevented SMI from determining a workable allocation between working capital and the settlement amount to creditors under the Restructuring Agreement."
It added: "As noted previously, SMI has already issued Hyflux two notices to remedy threats to the Tuaspring and Magtaa projects on Mar 18 and 25, 2019 respectively. These threats have not been remedied. (On Wednesday), SMI was informed of a threat to a third major project."
SMI also said it abided by the Restructuring Agreement at all times, and is taking legal advice on the matter.
In May 2018, Hyflux applied to the High Court to begin a court-supervised process of debt and business reorganisation following a period of financial strife.
The company blamed “prolonged weakness” in the local power market for its financial difficulties, which led to “short-term liquidity constraints in recent weeks”.
In October last year, Hyflux announced that SMI would take a 60 per cent stake in the company, investing a sum of around S$530 million.
READ: ‘We have not lost faith’: Hundreds of Hyflux investors gather to express concerns at Hong Lim Park
SIAS SAYS SHOCKED BY LATEST DEVELOPMENTS
Mr David Gerald, president of investor advocacy group the Securities Investors Association Singapore, said he immediately contacted Hyflux founder Olivia Lum after hearing the news.
"She said: 'Yes, we just cancelled because SMI is not responding, is not coming to the table'," Mr Gerald told CNA. "Basically, they're going to look at other interested parties who were also bidding during SMI's time," he added.
In a statement on SIAS' website, Mr Gerald added that the association has called on senior creditors not to put the company under liquidation "hastily".
"SIAS calls on the senior creditors to give the company a chance to provide an alternative proposal and not put the company under liquidation hastily, in which case the retail investors who are the perps and preps holders will lose everything," he said.
He added that on behalf of retail investors, he had conveyed to Ms Lum the "dissatisfaction with the last offer for them" and asked that she bear this in mind when discussing a new deal.
Salim Group, one of Indonesia's largest conglomerates and owner of Indofoods, has interests in infrastructure, utility companies and oil and gas in Southeast Asia. It controls power company Pacific Light Power in Singapore.
Medco, an Indonesian energy conglomerate, controls and operates the West Natuna Transportation System Pipeline, which delivers gas to Singapore.
Founded in 1989 by Ms Lum, Hyflux built two of Singapore's desalination plants that can meet up to 25 per cent of the city-state's water needs.
The company employs 2,300 people worldwide and has business operations across Asia, Middle East and Africa.
The company's total liabilities stood at S$2.6 billion at the end of March.