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Hyflux seeks court protection to reorganise business, debt

Court filing automatically qualifies Hyflux and its subsidiaries for a 30-day moratorium against creditors; possibly for a further 6 months

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Hyflux is seeking court protection to reorganise its business and address its debt pile.

Singapore

HYFLUX, once a market darling, is seeking court protection to reorganise its business and address its debt pile.

On Tuesday, the company, which first made its mark in water treatment, said it has applied to the Singapore High Court to commence the reorganisation of its liabilities and businesses after its power business took sustained hits from the prolonged weakness in Singapore's electricity market.

Hyflux and five of its subsidiaries, Hydrochem (S), Hyflux Engineering, Hyflux Membrane Manufacturing (S), Hyflux Innovation Centre and Tuaspring, filed the court application. The firm has appointed WongPartnership as its legal advisers and Ernst & Young Solutions as its financial advisers.

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The Business Times understands that with the filing, Hyflux and its subsidiaries automatically qualified for court protection under a 30-day moratorium that will apply against creditors' claims. In the weeks to come, Hyflux and its subsidiaries are expected to seek court approval to extend the moratorium possibly for up to another six months.

In a letter to shareholders, Hyflux's executive chairman and group CEO Olivia Lum said that by taking a step back to "assess holistically how to reorganise the liabilities", the group stands to protect the viability of its core businesses and position itself for long-term sustainable growth.

Ms Lum, often regarded as a poster child for technopreneurs here, said that the main objective of the exercise is "to provide much needed space and time for the group to focus on its ongoing discussions with strategic investors, optimise operations, target areas for growth and complete our projects to keep generating steady cash flow".

With the court application, Hyflux will be looking at staving off the repayment of liabilities accruing as of Tuesday, and free up cash flows to pay critical suppliers and creditors to carry on two projects in Oman and Singapore.

The firm is also seeking more time to divest its Tuaspring project in Singapore and the Tianjin Dagang plant in China. The divestment has taken longer than hoped to materialise, which has added further stress to cash flows.

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Hyflux, which once counted Singapore investment company Temasek Holdings as a shareholder, posted a net loss of S$22.21 million for the three months ended March 31, 2018, and its net cash flow from operating activities for the quarter was a negative S$51.18 million.

Tuaspring, the loss-making desalination and power plant, weighed down Hyflux's bottomline in the first quarter. Excluding Tuaspring, it earned a net profit of S$1.04 million.

Hyflux said in March that it would not redeem perpetual securities that were reaching their first call date in April 2018. The move resulted in a step-up of the coupon yield on these perps from 6 per cent to 8 per cent per annum.

The firm has S$1.3 billion of net borrowings against S$1 billion of total equity as at March 31, 2018. Over recent years, Hyflux had been aggressively issuing bonds to fund its rapid expansion.

Hyflux's woes were attributed to depressed prices in an over-supplied electricity market. That has seen improvement of late, with the firm pointing to increase in wholesale electricity monthly prices since January 2018.

The company sought court protection under Singapore's updated debt restructuring law, which incorporates elements that provide more room for rehabilitation of companies facing financial distress. A WongPartnership spokesman said that the enhanced restructuring regime "is conducive to pursuing a swift and collaborative outcome... for home-grown successes like Hyflux whose business continues to be relevant for Singapore's future economy".

BT understands that Hyflux and its legal and financial advisers are assessing options including extending the maturity of the group's bank loans, to improve cash flows.

Shares in Hyflux last changed hands at 21 Singapore cents on May 18 before it called a trading halt.

READ MORE: Hyflux CEO Olivia Lum's letter to stakeholders

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