Hyflux has till March 10 to get court okay for scheme meeting

Singapore

HYFLUX'S new lawyers from Clifford Chance have until March 10 to apply for leave from the High Court to convene its scheme meeting.

It will be a race to get all the documentation in order, especially an agreement on the amount of funds in Utico's pot of adviser fees, as they sprint toward the May 26 deadline.

At Thursday's hearing, Nish Shetty, partner at Clifford Chance Asia, who takes over from WongPartnership in representing the embattled water treatment firm, said: "We have a guillotine that is imposed upon us by the restructuring agreement, and that guillotine is the long-stop date."

He talked at length about how in the two-odd weeks since his firm took the reins, progress on much of the documentation has been made, with the exception of the explanatory statement, which his team is still drafting from scratch.

"The creditors feel and we agree that seeking leave today would be premature... Both the company and a large portion of the creditors before this court are of the view that a bit more time will enable some of these important matters to be ironed out."

He listed four outstanding issues that need to be settled with the unsecured working group (UWG) of creditors to gain their support: namely the financial and know-your-customer (KYC) due diligence, security documentation, proposed changes to the scheme terms, as well as professional adviser fees.

On the latter point, Mr Shetty said Utico had indicated through a letter that the amount it is willing to put into the pot could be S$50 million instead of the original S$40 million, in which case the advisers involved could be paid "pretty much in full". But he said his team was still seeking clarity on this, as the letter was expressed in unclear terms.

Utico had previously said it would raise the pot for adviser fees to S$50 million if it receives support from all advisers for the scheme and restructuring agreement at a court hearing on Jan 29, and that it would shrink it to S$30 million if the advisers fail to support the scheme at the hearing.

Mr Shetty added that a S$40 million pot would cover about three quarters of the adviser fees. "That's not a bad position to be in," he said.

At the hearing, Eddee Ng, senior partner at Tan Kok Quan Partnership, who represents the UWG, said his clients were unable to state their position on the scheme until they have received the necessary documents required from Utico, particularly pertaining to KYC and financial due diligence and adviser fees. These include Utico's FY19 audited accounts and management accounts, and not merely the draft financial statements they have received.

He also took issue with the lack of clarity on how much in advisers fees Utico will be paying. The chicken-and-egg situation is such that the amount that goes into the pot depends on creditors' support for the leave application, whereas UWG has said it cannot state its position until there is clarity on adviser fee payments.

Mr Ng said: "The state of play in terms of information that's being asked for is that it's not at the point that the UWG is able to support the scheme... The point remains that there is still some distance to go in all of this. On that basis, we are not objecting to the adjournment but we can't agree with it."

The seven unsecured banks under the UWG include BNP Paribas, Mizuho Bank, KFW IPEX-Bank, Bangkok Bank and Standard Chartered Bank.

On fee payments for advisers appointed by Securities Investors Association Singapore (Sias) to represent small-time debtholders, Mr Shetty said that to date, Hyflux has paid S$2.4 million in fees to Sias advisers, including a sum of S$1.1 million last October.

Sias advisers will also be part of the pool of professional advisers whose fees will be taken into account as part of the S$40 million-or-so pot. Justice Aedit Abdullah also said if need be, the court has the power to order payments into escrow.

At the hearing, the judge ordered that by March 2, any opposing parties to the scheme have to indicate so to Hyflux's lawyers. He also extended Hyflux's moratorium to April 30.

Just a day before the hearing, another suitor had emerged for Hyflux. This was Longview International in conjunction with a Chinese partner.

On the possible entry of a new investor, Mr Shetty said that all there is now is a statement of intention from the investor.

"Whether the investor has a proposal or not, or one that merits consideration by the company and the creditors, it's all very early days. We just have to see how this plays out... Unless and until we see the nuts and bolts of a real proposal, it'd be impossible for the company to take any view on this."

The two firm offers so far remain Utico's, and another by Aqua Munda to buy out the debt of certain classes of creditors.