Hyflux hopes for a strategic investor as bank lenders grow skittish

Singapore

AS THE clock ticks down to the Dec 18 deadline when Hyflux's debt moratorium will expire, the survival of the insolvent water project developer could hinge on whether any strategic investors come through.

WongPartnership lawyer Manoj Sandrasegara, who represents Hyflux, told a Singapore High Court on Monday that the company had "spent a lot of time" meeting with strategic investors in September to discuss deal terms.

"Hopefully something can be said in November," he said.

Hyflux has reached advanced talks with two interested parties, he said, but declined to reveal their identities.

If Hyflux is able to hammer out a deal with potential strategic investors, then it can determine how much of its debts can be paid in full, and begin negotiating the terms of a restructuring with various creditor groups.

Mr Sandrasegara added: "I know the company has come under some criticism from creditor groups that information disclosure has been slow, but the company has to prioritise things like the stabilisation of the business, preparing data rooms for DIP (debtor-in-possession) financiers, and getting the TuasOne and Qurayyat projects going."

At Hyflux's case management conference on Monday, Justice Aedit Abdullah said that if Hyflux were to come before the court in December to seek more time to stave off creditors, the company would have to show more concrete progress to convince him to extend its lifeline.

He said: "I will need very strong reasons because you would have had six months and some creditors are getting quite skittish given how things are going... Opposition from creditors might be significant at that point."

In response to Justice Abdullah's question on where he sees Hyflux at the end of December, Mr Sandrasegara replied: "On the basis of a wish list, we would like to see a binding term sheet (with a strategic investor) executed subject to a scheme of arrangement with creditors. If we move at great speed and creditors are agreeable, we could have an in-principle agreement that can be put to a vote by creditors... I don't think we can get a scheme signed and sanctioned before the moratorium ends."

Hyflux has previously emphasised the importance of pulling in a strategic investor to give the company a cash injection in exchange for some form of control. Hyflux is in the EPC (engineering, procurement and construction) business, where cash is needed to win new projects and work on them.

On Monday, five of Hyflux's bank lenders also raised concerns about what they felt were unsatisfactory disclosures by the company on its restructuring process.

Tan Kok Quan Partnership lawyer Eddee Ng, who represents BNP Paribas, Mizuho Bank, KFW IPEX-Bank, Bangkok Bank and Standard Chartered Bank, told the court that "key pieces of information" were missing from the data room that Hyflux had shared with its creditors.

Mr Sandrasegara disputed this, but said that Hyflux would see what could be done.

While commercial difficulties could get in the way of full disclosure, it is natural for creditors to seek a frank picture of the restructuring process to assess its efficacy, as the company's funds are being spent as the process drags on.

Meanwhile, the sale process for Tuaspring is ongoing. Maybank, Hyflux's largest secured lender, had earlier agreed to give it until Oct 15 to find a buyer for the Tuaspring integrated water and power plant and ink a binding purchase agreement.

Reportedly, Sembcorp Industries was the only party to submit a final bid for Tuaspring by an Oct 1 deadline. Hyflux has approached national water agency PUB to allow overseas bidders to cast bids as well, Bloomberg reported. However, it is not clear yet if Hyflux has received any firm interest from foreign investors.

It remains to be seen if Hyflux accepts Sembcorp's bid for Tuaspring (which Bloomberg reported is not sufficient to cover the debts owed to Maybank). Other possible outcomes are that the contractual deadline between Maybank and Hyflux gets extended beyond Oct 15, or Maybank puts Tuaspring under receivership.

Lawyers for PUB were present at the case conference on Monday, though they remained silent throughout.

The next hearing will take place on Oct 31, at which time Hyflux will give an interim update on the restructuring.

A status conference will also be held in the week of Nov 19. Hyflux must indicate then whether it hopes to extend its debt moratorium.

Hyflux is dealing with a massive group of stakeholders.

When the debt moratorium was granted in June, the entire Hyflux group had a total bank debt of about S$1.84 billion. It owes note holders S$265 million. Another S$900 million is owed to 34,000 perp and pref share holders. It also has more than 16,000 shareholders.

As of this month, Hyflux is in arrears with its rent for two premises, a lawyer for the trustee of Ascendas Reit told the court on Monday.

Ascendas Reit is the landlord for the Hyflux Innovation Centre at Bendemeer Road and the Hyflux building at Kallang Bahru.