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Ex-white knight SM Investments sues Hyflux for breaching agreement terms

Former white knight SM Investments (SMI) has said it will be suing debt-laden Hyflux for cancelling the S$530 million rescue deal, it said in a statement on Friday (April 19).

[SINGAPORE] Former white knight SM Investments (SMI) will sue debt-laden Hyflux for cancelling the S$530 million rescue deal, it said in a statement on Friday (April 19).

The move means both Hyflux and SMI will be making a grab for the S$38.9 million deposit that was placed in escrow by SMI for the restructuring agreement.

SMI said it had not accepted the water treatment group's "purported termination" of the investment deal on April 4, adding that SMI only ended the deal on Friday (April 19) in accordance with the terms of the agreement.

The decision to terminate was based on several "termination events", the investor group said.

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It said that Hyflux had wrongfully tried to walk away from the rescue deal through its actions on April 4. "This was a repudiatory breach of the agreement by Hyflux entitling SMI to terminate the restructuring agreement," said SMI.

Hyflux had also failed to meet the April 16 deadline to satisfy various conditions, which included obtaining a sanctioned scheme of arrangement to settle the amount owed to creditors. SMI said this failure meant that the agreement would automatically cease to operate.

The arrangements were supposed to be put to a vote by Hyflux's stakeholders in two days of scheme meetings, but Hyflux called off the vote before they could take place on April 5 and 8.

SMI said that issues at Hyflux's three projects - Tuaspring, Singspring and its Algerian desalination plant Magtaa - have not been remedied.

On Wednesday, national water agency PUB issued a notice to Tuaspring Pte Ltd saying that it would take back the desalination plant after 30 days. The Tuaspring plant has been at the heart of Hyflux's financial woes.

"Each of the termination events entitles SMI to a refund of its deposit in accordance with the restructuring agreement," said SMI, adding that it rejects Hyflux's accusations on Monday that it reneged on the deal.

Hyflux has nearly S$2.95 billion of debt as of March 31 last year, and as part of the now-aborted deal with SMI, had agreed to sell a majority stake in the restructured company to SMI in exchange for a S$530 million investment.

Hyflux pulled out of the agreement because of SMI's "repeated refusal to commit to making the investment necessary for the restructuring", it said previously.

The clock is ticking down until April 30, when the court-sanctioned debt moratorium that protects Hyflux from its creditors expires.