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Salim, Medco consortium to pump S$530m into Hyflux

A CONSORTIUM comprising two Indonesian firms - conglomerate Salim Group and energy giant Medco Group - has entered a binding agreement to invest S$530 million in troubled water treatment firm Hyflux, the latter announced on Thursday after the market closed.

The consortium, SM Investments, will own 60 per cent of equity in Hyflux upon completion of the deal.

As part of its restructuring exercise, Hyflux conducted a competitive bidding process for strategic investments in its business. Having entered non-disclosure agreements with 16 potential interested parties, discussions were narrowed to eight parties, culminating in the restructuring agreement with SM Investments on Oct 18.

SM Investments will subscribe for ordinary shares representing 60 per cent of the enlarged issued share capital in Hyflux for S$400 million, and grant Hyflux a shareholder's loan of a principal amount of S$130 million. It will also grant Hyflux a loan of S$30 million for its interim working capital requirement, for the period prior to the completion of the proposed investment.

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The consortium has a track record of running diverse businesses in South-east Asia and other parts of the world, as well as experience in owning and operating water and power utilities; power generation and distribution assets; and oil and gas properties.

Salim Group chairman Anthony Salim told a signing ceremony at Hyflux Innovation Centre on Thursday evening: "I'll make sure that the CEO of this company, the strong lady, is going to continue her leadership for a few years, if not more."

Said Medco Group founder Arifin Panigoro: "Our aim is to further grow Hyflux, leveraging on its strength in system integration and optimisation of water treatment and waste management as well as in power generation."

Arief Sidarto, chief executive of SM Investments, said: "Our view is that Hyflux as a whole should be kept together and we believe we can grow it into a platform that all of us and Singapore can be very proud of."

Hyflux executive chairman and group chief executive officer Olivia Lum said: "Since May, we have been in discussions with various investors who have expressed interest in playing a role in our restructuring. After a rigorous selection process, the board of directors unanimously selected the Salim and Medco consortium as a strategic partner ... They, like Hyflux, they want everything to be intact, this is their intention. We still have to engage the lenders and the authorities to get clearance."

Hyflux needs to get its bank lenders, noteholders, preference share and perpetual securities holders onboard via a scheme of arrangement before the S$530 million is injected into the company. Ms Lum also noted that secured lender Maybank had agreed to give Hyflux up till Oct 29 to find a buyer for Tuaspring earlier this week.

"We will have to engage Maybank ... With this restructuring successfully proceeded, we will not attempt to sell anymore assets," she said.

Asked by The Business Times how much of their investments perp, pref and noteholders can expect to recover, and how the S$530 million will be put to use, Ms Lum replied: "Today is a happy day. Subsequently, we will have a lot of things to do. We will leave it to all the experts to work out a plan. Today, we are not able to let you know."