Utico's rescue offer not open to Hyflux's Olivia Lum, says CEO

UTICO, the Emirati utility firm and hopeful white knight of Singapore's beleaguered Hyflux said its proposed offer to holders of the water treatment firm's preference shares and perpetual securities (PnP) as part of a rescue deal was not open to Hyflux founder and chief executive Olivia Lum.

"Our offer is not open to them (Ms Lum and Hyflux directors who hold PnP). But it's up to the Singapore Exchange to decide and come back to us on whether this is discretionary as the offer needs to be uniform to everyone or they can be kept out of the deal," Utico's chief executive officer Richard Menezes told reporters after a three-hour townhall session that lasted well past 10pm on Monday for Hyflux's PnP investors.

The townhall session was arranged by the Securities Investors Association (Singapore) or Sias.

Earlier at the townhall session, which was attended by over 360 PnP holders, Mr Menezes said if Utico's restructuring plan were to be approved, the new board will decide on the Singapore firm's management.

"Naturally, there will be a change. She (Ms Lum) will be decided by the new management. There is no pre-agreed role or understanding with her," he elaborated.

On the other hand, he said, the offer by Aqua Munda - the other potential investor who swooped into the picture later in the day and over the weekend said it will commit S$208 million to fund the purchase of Hyflux debts and as well as for working capital needs - was contingent on Ms Lum staying and agreeing to the offer.

"Our offer is that there is no agreement or written understanding...nothing with her as the new shareholders and board will decide," Mr Menezes said.

Sias' letter to the Hyflux board last week had asked the water treatment firm to confirm whether Ms Lum would give up her entitlement in her position as a PnP holder, for the benefit of other holders under the Utico deal. Ms Lum, said Sias, had been "more than willing" to give up such entitlement under the now-scrapped Salim-Medco consortium rescue plan.

But Utico's strongest point of persuasion that rang loudest at Monday's session to win over the hearts of PnP holders for its rescue bid was clearly that its package was as good as it gets and that investors stood to get nothing in a liquidation scenario.

"The envelope has been stretched and bursting at the seams in many places. If we create more for PnP holders, there will be more uproar at the senior (creditors) level. Utico has to keep in mind how much they are paying. There is a finite amount. What is put on the table is well beyond what any rational investor will pay," said Asar Mashkoor of Emirates NBD Capital, Utico's transaction adviser.

Under the rescue package signed last November, PnP holders have two options. The first is an upfront cash payment of S$1,500 or 50 per cent of their holdings, whichever is lower.

The second option is a deferred payment option, under which PnP investors receive the same amount over a period of two years, with an added 1.25 per cent interest per annum. They will also receive an additional payout from a S$50 million pool of cash, on a pro rata basis.

If Utico lists within two years of the completion of Hyflux's restructuring, the pro rata additional payout will come from the cash equivalent of a 4 per cent stake in Utico at the listing price or S$50 million, whichever is higher.

Hyflux owes S$900 million in PnP principal value to about 34,000 retail investors, one-third of whom are smallholders who own S$5,000 and less, according to Mr Menezes.

"We believe Hyflux is a horse. Just like Utico is a horse. I have been in this business for 29 years and I am 50 years old.

"Hyflux is a wounded horse today and we can do something to get it back on track. We are not merging so we have two independent horses running on the track. We can win. We are not here because Hyflux is a gold mine. There's work to be done on the horse. It's useless if we don't fix the horse. It will die anyway," said Mr Menezes, in response to questions on why Utico was interested in Hyflux.