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Restructuring agreement at risk due to Tuaspring default: Hyflux

HYFLUX'S restructuring agreement with SM Investments Pte Ltd may be terminated if defaults by Hyflux subsidiary Tuaspring Pte Ltd are not remedied within two weeks, the water treatment company said in a Singapore Exchange filing on Monday.

Hyflux on Monday received a notice from its investor SM Investments, which referred to the default notice slapped on Tuaspring by the Public Utilities Board (PUB) on March 5. PUB's notice said the national water agency would exercise its right to terminate its Water Purchase Agreement with Tuaspring and take control of the plant if all defaults are not fully resolved within the default notice period.

According to the restructuring agreement between Hyflux and SM Investments, the investor has the right to terminate the agreement if a "prescribed occurrence" occurs and, if the occurrence can be remedied, it is not remedied within two weeks or such other mutually agreed period.

Hyflux or Tuaspring ceasing or threatening to cease to conduct its business in the usual or ordinary course is a "prescribed occurrence" within the meaning of the restructuring agreement.

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As a result, SM Investments may assert its right to terminate the restructuring agreement if the matters stated in the PUB notice are not remedied by the end of the two-week period, which is April 1.

Hyflux and Tuaspring said that they are seeking legal advice on the investor's notice, and are in communication with PUB and the investor on the matters in the PUB's notice and investor's notice.

Under the PUB default notice, Tuaspring has a cure period of 30 days until April 5 or "such longer period as may be reasonable" to consult with PUB on the steps it must take to cure the alleged defaults. If the defaults are not cured in time, PUB has the right to terminate the water contract by giving written notice of not less than 30 days to Tuaspring. PUB can also take control of the plant, once the default notice period expires.