Utico agrees in principle with Hyflux to cap all adviser fees at S$40m

Singapore

UNITED Arab Emirates utility firm Utico announced on Thursday that it has agreed in principle with Hyflux to cap all adviser fees at S$40 million.

This will resolve a contentious item under the restructuring agreement and takes it one step closer to finalising a rescue deal for the insolvent water treatment firm, Utico said in a statement.

The utility firm said that Hyflux adviser Nicky Tan led the talks with Utico's board. Utico chairman Rashid Al Balooshi and Mr Tan will discuss with other advisers so that they, too, can agree to the fee limit, according to the statement.

However, the potential white knight also warned it will shrink the S$300 million equity injection for senior unsecured creditors to S$200 million early next week if Hyflux still has not signed the definitive restructuring agreement by then.

"This continuous loss of time has a great impact on the holding value of Hyflux," Utico said.

The original proposed rescue package involves Utico taking an 88 per cent stake in Hyflux through a S$300 million equity injection and a S$100 million shareholder loan.

In addition, it is offering two possible options to the 34,000 retail perpetual securities and preference (PNP) shareholders. One option is a payout totalling S$50 million, based on small investors (who had invested S$2,000-S$3,000) each receiving 50 per cent of their holdings, up to S$1,500 per investor. The other option is a S$100 million payout over four years plus a 4 per cent stake in the enlarged Utico group.

Excluding the equity injection, the other portions of the package will remain the same even if the restructuring agreement is not signed by early next week, Utico said.

Advisers and a delegation from Hyflux led by chief executive Olivia Lum visited Dubai last week to discuss pending issues. An agreement on board representation was reached, according to the statement. "Currently, Hyflux board members can resign without responsibility. But we want some of them to stay during and after this (restructuring) process," a Utico spokesman told The Business Times on Thursday.

On Wednesday, Hyflux said its executive vice-president and group chief financial officer, Lim Suat Wah, will go on sabbatical leave on Nov 8.

Utico said that the parties will also continue to discuss a trust mechanism structure for obtaining PNP investors' binding consent for the rescue deal. This follows an Aug 1 townhall which saw most of the 43 PNP attendees voting in favour of Utico's offer.

A key item still outstanding is the management oversight regarding the consent and consultation provisions in the agreement, which Utico said could be a possible deal breaker.

It reiterated its concern over "value leakage" in Hyflux as the talks drag on. It stressed that time is of the essence, as other parties are eyeing Hyflux's assets. These investors include Mitsubishi for the TuasOne project, as well as Spain's Valoriza and Europe's Aqualia and Suez Group for the Algeria project, Utico said. Minority shareholders of the Qurrayat project in Oman have also agreed to take over the plant, it added.

Hyflux had told the court last month that more than one investor stand ready to invest in the debt-laden firm, even if a deal with Utico were to fall through.

It did not respond to a request for comment by press time.