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Utico says adviser fees capped at S$40m; may cut Hyflux investment next week

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

This will thus resolve a key item under Hyflux's restructuring agreement, and is a step closer to finalising the rescue deal for the insolvent water treatment firm, Utico noted in a media statement.

The utility firm said that Hyflux adviser Nicky Tan led the talks with Utico’s board of directors. Utico chairman Rashid Al Balooshi and Mr Tan have said that they will discuss with all other advisers to recommend they agree to the fee limit, according to the statement.

However, the potential white knight also warned that it will shrink the S$300 million equity injection to S$200 million by 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 on Thursday.

The original proposed rescue package involves Utico taking an 88 per cent stake in Hyflux through a S$300 million equity injection for senior unsecured creditors, as well as 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 hoping to recover the S$900 million they invested in Hyflux. One option is a payout totalling S$50 million - based on small investors (who had invested S$2,000-3,000) 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 on Thursday.

Last week, advisers and a delegation from Hyflux led by chief executive Olivia Lum visited Dubai to discuss pending issues.

An agreement on board representation was reached, the utility firm said in the statement. “Currently, any Hyflux board member can resign without responsibility. But we want some of them to stay during and after this (restructuring) process, hence our flexibility in understanding their situation,” 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 from Nov 8.

Parties will also continue to discuss a trust mechanism structure for obtaining PNP investors’ binding consent for the rescue deal, Utico said on Thursday. This follows an Aug 1 informal town hall where most of the 43 representative PNP attendees had voted 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, according to the statement.

Utico reiterated its concern over “value leakage” in Hyflux as the talks drag on, and a possible impact on the bottom lines of both companies.

It stressed that time is of the essence, seeing 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. The 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 rescuer stand ready to invest in the debt-laden firm, even if a deal with Utico were to fall through.

Hyflux has not responded to a request for comment on the announcement.

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