Can the Hyflux restructuring be resurrected?

IT was hugely disappointing to learn last week that troubled water treatment firm Hyflux Ltd has terminated its agreement with SMI, the only white knight that has emerged over the past year with funds to help Hyflux. Ever since SMI announced its S$530 million rescue package last October, Sias had consistently maintained that no effort should be spared to ensure that SMI stayed in the game, while urging all stakeholders to show up and vote at their respective restructuring extraordinary general meetings in order to stave off liquidation and save the company.

After last week's shock announcement, many questions are puzzling. The obvious one would be whether the contract between Hyflux and SMI had been breached and if so, what exactly is the breach. It appears to be this: SMI obviously underestimated the level of capital required to run Hyflux post-restructuring and had disagreed with the allocation from the S$400 million cash injection to pay the creditors.

Hyflux in its announcement last week said it wrote to SMI asking for a clear and unequivocal written confirmation of SMI's commitment while also stating that if none was forthcoming, Hyflux would have no choice but to terminate the agreement.