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Chinese power service provider eyeing Hyflux assets

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Debt-ridden water treatment firm Hyflux has received a fourth non-binding letter of intent (LOI) for a potential investment from a Chinese power service provider.

DEBT-RIDDEN water treatment firm Hyflux has received a fourth non-binding letter of intent (LOI) for a potential investment from a Chinese power service provider.

The announcement, issued on SGX after midnight on Friday, came ahead of a June 17 deadline to sign a binding agreement with United Arab Emirates utility Utico for its US$400 million investment.

The embattled company is in talks with at least seven investors for a potential cash infusion, and plans to enter into a binding term sheet with one of them by mid-June. Its court-approved debt moratorium will end on Aug 2.

When asked on Saturday, Hyflux declined to reveal details of the potential investment, and whether the Chinese investor is among the seven mentioned at a court hearing on May 29.

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It would only say that the investor is a subsidiary of a state-owned enterprise that provides power services, and its holding company provides expertise in wind and solar energy solutions, nuclear industry, medical technology and agriculture.

The LOI is subject to regulatory clearance, due diligence and the execution of a binding agreement on mutually agreeable terms.

The Chinese investor has executed a non-disclosure agreement, commenced preliminary due diligence on the group, and also reserved its right to terminate discussions if a judicial manager or liquidator is appointed over Hyflux or its subsidiaries.

Hyflux added that it is continuing its engagement with all potential investors.

The distressed firm has prioritised discussions with investors that are willing to keep the Hyflux group intact, as opposed to those that prefer to "cherry-pick" parts of its business, Hyflux lawyer Manoj Sandrasegara said at the May 29 hearing.

Apart from Utico, Mauritius-based investment fund Oyster Bay Fund is in advanced talks on a binding agreement for up to $500 million.

A third potential investor, said to be a large desalination company, had issued a letter of interest for certain assets in Algeria, Oman, the Middle East and North Africa.

Four more companies are also in discussions over a potential investment. They are a large power sector player in Asia looking to merge with Hyflux group, a fund whose corporate strategy included turning around distressed firms, a major Asia-based nuclear and civil engineering contractor, and a major waste treatment player.

Hyflux will meet stakeholders and draw up terms of a restructuring scheme by the end of this month, and aims to apply for leave to convene scheme meetings for creditors in July.

Hyflux had asked on May 29 for a four-month extension on its debt moratorium, saying it was in discussions with other potential investors.

But High Court Justice Aedit Abdullah said he was "concerned about giving a four-month (extension) at a go", maintaining that the company needs to be kept on a tight leash.

That said, he told Hyflux to "assure the investors I will be amenable, if progress continues to be made, to a further two-month extension" beyond Aug 2.

The High Court will hear an update on Hyflux's restructuring process that day, and the company is expected to apply for its moratorium to be extended.

THE STRAITS TIMES