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Hyflux debt moratorium extended to end-Jan, advisers to discuss fees over coffee

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The Hyflux lenders that were reportedly opposed to the rescue deal signed by Hyflux and white knight Utico came up empty on their threat to block the restructuring on Friday.

THE Hyflux lenders that were reportedly opposed to the rescue deal signed by Hyflux and white knight Utico came up empty on their threat to block the restructuring on Friday.

In the High Court, Justice Aedit Abdullah granted Hyflux a two-month extension of its debt moratorium, with the next hearing to be held on Jan 29. This was the same amount of time that Hyflux had sought. It plans to file applications for scheme meetings with creditors before the end of January.

No parties were opposed to the extension of the moratorium, though the question of how a S$40 million pot of money should be distributed among all professional advisers involved in the restructuring was brought up in court.

Debtwire reported on Wednesday that an unsecured working group (UWG) of banks comprising BNP Paribas, Bangkok Bank, KFW IPEX-Bank, Mizuho Bank and Standard Chartered Bank (Singapore) were opposed to the terms of the Hyflux-Utico deal. In particular, Hyflux should not have agreed to pay financial adviser nTan a success fee of up to S$25 million, the group argued. The UWG's financial adviser is Borrelli Walsh.

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However, the UWG did not oppose the extension of the moratorium on Friday, nor did it cast a blocking vote against the proposed rescue plan.

“We’re prepared to work with the company over the term of the moratorium to see if consensus can be reached on the restructuring agreement," said Tan Kok Quan Partnership lawyer Eddee Ng on behalf of the UWG.

WongPartnership lawyer Manoj Sandrasegara, who represents Hyflux, noted the concerns raised by the UWG. But he is "reasonably confident" that the issue will be resolved, he told the court.

"(We’ll) sit down in a room and have a nice cup of coffee and sort this out... It shouldn't be a case of the tail wagging the dog. This shouldn’t be a stumbling block," he said.

On Tuesday, Hyflux, which has been under bankruptcy protection since May last year, signed a S$400 million rescue package with Utico. The Emirati utilities group has agreed to set aside up to S$100 million to pay off 34,000 retail holders of Hyflux preference shares and perpetual securities who are owed a total of S$900 million in face value.

But Utico can call off the deal if Hyflux and its team of professional advisers fail to agree on how much everyone should be paid.

In April this year, after rescue talks with an Indonesian consortium led by Anthoni Salim broke down, Hyflux engaged a new financial adviser, nTan, to help salvage the situation.

Hyflux agreed to pay nTan an upfront S$1 million nonrefundable engagement fee, according to documents seen by The Business Times.

Hyflux also agreed to nTan's monthly retainer fee of S$500,000 per month for the first two months, S$425,000 per month for the third and fourth month; and S$350,000 per month for the remainder of the engagement, the documents showed. These sums are subject to review but invoiced monthly in advance and payable immediately.

Separately, nTan’s success fee is computed based on the sum of a few things, including 7.5 per cent of the total value of Hyflux’s debt that is waived, written off, extinguished, forgiven or avoided; 1.5 per cent of the total value of Hyflux’s debt that is restructured, repaid or refinanced; and 1.5 per cent of any transaction undertaken by the Hyflux group and its associates.

In an affidavit filed on Wednesday, Hyflux chief executive Olivia Lum discounted the objections made by the UWG and Borelli Walsh, noting that they have "consistently advocated and pushed for putting Hyflux under judicial management".

Ms Lum wrote: "As stated in my affidavit of August 2, 2019, the financial advisor to the UWG even went as far as to request Utico to work with him and for the UWG to put Hyflux under judicial management, and in return, he was prepared if appointed as the judicial manager of Hyflux, to sell the assets of Hyflux to Utico for a significantly smaller sum as opposed to the investment proposed by Utico."

The rescue deal is subject to other conditions precedent, such as regulatory approval from the National Environment Agency (NEA) in relation to the change of control in Hyflux's TuasOne waste-to-energy project.

Drew & Napier lawyer Mohan Gopalan, who acts for NEA, told the court on Friday that the NEA is supportive of the novation initiative: "Reaching an agreement is the best outcome for the project."