Utico seeks Sias endorsement as Hyflux judicial management looms

UTICO on Wednesday urged the Securities Investors Association (Singapore), or Sias, to endorse the Middle Eastern utility firm's proposed rescue package for Hyflux.

The offer could "save" the distressed water treatment firm from judicial management (JM) and guarantee the highest possible recovery for the holders of Hyflux's perpetual securities and preference shares (PnP), Utico said in a press statement.

A group of bank lenders is preparing to file an application with the Singapore High Court by Aug 7, to place Hyflux under JM.

On Monday, Justice Aedit Abdullah gave the go-ahead for the unsecured working group (UWG) of banks comprising Mizuho, Bangkok Bank, BNP Paribas, CTBC Bank, KfW, Korea Development Bank and Standard Chartered Bank to be carved out of Hyflux's debt moratorium, after the UWG argued that it can no longer trust Hyflux's management to lead any restructuring effort.

The chance of a successful Utico deal is nil, according to the UWG's lawyer Eddee Ng of Tan Kok Quan Partnership. This is because the UWG and an informal steering committee of medium-term note holders who together represent 73 per cent of Hyflux's senior unsecured debt have said they will vote against the Middle Eastern suitor's deal, Mr Ng said on Monday.

Still, on Wednesday, Utico emphasised that its proposal is "the only viable binding offer" on the table and was made in good faith and based on PnP investors' requests during this January's town hall.

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Investors with the smallest PnP holdings stand to get a 50 per cent return, while those with the largest holdings can get at least a 10 per cent recovery under the Utico deal.

It noted that the debt purchase offers made by other potential white knights will require support from 25.1 per cent of senior debt before the creditors can get a blocking right to prevent Hyflux from being put under JM.

Moreover, invitations that depend on Hyflux directors and shareholders keeping 100 per cent of their positions, while seeking high discounts of up to 91 per cent from creditors, are "untenable", Utico said.

The best-case scenario for PnP holders, as they are subordinate to senior unsecured creditors, from such invitations will thus be a recovery of only about 5 per cent, it added.

Last week, Sias asserted that it will not support any plan to rescue Hyflux that lacks a "concrete proposal" to resolve the debts due to PnP holders. The investor advocacy group's chief David Gerald flagged that the slew of potential investors that have surfaced in recent weeks have not made any offers yet for Hyflux's 34,000-odd retail PnP holders, who are owed some S$900 million in total.