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Hyflux gets letter of interest from Unilegend Investments

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Unilegend Investments's client is prepared to provide working capital for Hyflux if it completes the investment either by becoming a substantial shareholder or by owning the group's debt.

YET another unnamed investor is stalking Hyflux, and has written to the distressed water-cleaning firm to express its interest in a possible investment.

Hyflux said on Friday that it has received a letter of interest from Singapore-incorporated Unilegend Investments, on behalf of a client.

Unilegend Investments did not name the client, but said that its focus is on clean energy and water. Unilegend representative Peng Chun-Sheng wrote: "Our client has plans to carry out seawater desalination projects in Shandong and Tianjin in China, and sees great synergies with Hyflux."

This client is prepared to provide working capital for Hyflux if it completes the investment either by becoming a substantial shareholder of Hyflux or by owning the group's debt, Mr Peng said.

"We also wish to state that we would not consider making this investment if Ms Olivia Lum and her current management and board of Hyflux are removed, or if the Hyflux Group is placed into judicial management or liquidation," he added.

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Hyflux chief executive Ms Lum, together with the group's current and former directors, are under investigation by the Singapore police and financial regulator for suspected false and misleading statements and breaches of disclosure rules that may have taken place over a period of years.

Some of Hyflux's creditors, namely Bangkok Bank, BNP Paribas, CTBC Bank, Mizuho, KfW, Korea Development Bank, Standard Chartered Bank adn ESR-Reit, want to replace her and her team with judicial managers. Their applications to be carved out of Hyflux's debt moratorium will be heard in the Singapore High Court on July 27.

While Unilegend mulls an investment, other investors have made offers to Hyflux's senior unsecured creditors to buy their debt at a discount.

On Thursday night, Indonesian Johnny Widjaja, the chief executive of PT Havilah, which is developing a coastal industrial estate in Java, made a formal cash offer for the debt of Hyflux’s bank lenders, note holders and other senior unsecured creditors through his vehicle, Pison Investments.

The price for any offered debt purchased will be determined via a reverse Dutch auction, which is the opposite of a conventional auction, as potential sellers make the bid rather than the buyer. The bids start low and go higher until the money set aside for the purchases is exhausted.

In this case, Mr Widjaja has set aside S$200 million to purchase the debts and to provide working capital to the group. His offer is subject to a minimum offered discount of 91 per cent. The deadline for senior unsecured creditors to offer their debts to Pison is 5pm on Aug 17. Pison then has until 5pm on Sept 25 to accept these offers. The long-stop date is Dec 31. (see amendment note)

If Mr Widjaja is able to buy out all of the senior debt, he can retire Hyflux’s debts at a discount and take the company out of insolvency without having to make any payments to holders of Hyflux's perpetuals and preference shares (PnP).

His offer is largely similar to an outstanding offer by special-purpose vehicle Aqua Munda.

Aqua Munda is offering to buy the senior debt at a minimum discount of 85 per cent in a reverse Dutch auction, and has committed S$208 million to make the purchases, as well as to fund Hyflux's capital requirements in addition to the debt buyout, if agreed.

However, the two offers differ in one key detail.

Mr Widjaja's offer is conditional on Ms Lum and Hyflux's other current directors and senior executive management remaining in office. This was not a condition of the Aqua Munda offer.

According to the offer document from Pison Investments, Mr Widjaja is building Patimban Industrial Park, an approximately 6,000-hectare development in Java that is located by a new international deep sea port, with plans for a new power plant and a water-treatment plant. As for Aqua Munda, it has not disclosed its source of funds.

Separately, Emirati utilities group Utico said on Thursday that it still wants to engage with Hyflux to work on a restructuring plan, after its earlier offer lapsed.

In its new proposal, Utico will subscribe for S$340 million new shares in Hyflux for a resultant 70-per-cent equity stake, which works out to an equity valuation of S$485 million for Hyflux, Utico chief executive Richard Menezes told The Business Times.

Of the S$340 million, S$275 million in cash will be used as part of a cash and stock deal to settle Hyflux's outstanding debts, including payment to the PnP holders. The remaining S$65 million will be used as working capital and to pay Hyflux's advisers, Mr Menezes said. 

One of Hyflux’s restructuring advisers, nTan Corporate Advisory, will also get a 5 per cent stake in Hyflux.

Details of Utico's latest revised offer have been sent to creditors, he said.

However, Hyflux has not formally announced this update from Utico to the Singapore Exchange, where the updates from Unilegend and Pison were posted.

Amendment note: A previous version of this story incorrectly stated the deadline for senior unsecured creditors to accept the offer as 5pm, Sept 25. They in fact have till 5pm on Aug 17 to offer their debts to Pison, and Pison then has till 5pm on Sept 25 to accept these offers.

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