Will Utico’s Restructuring Deal Save Hyflux from Sinking Further?
The water treatment firm, Hyflux is going to enter into a restructuring agreement with Middle Eastern utility, Utico that will take a 95 percent stake in the former in a $400 million rescue deal.
As the extended debt moratorium of Hyflux is set to expire next Monday, Hyflux made the announcement yesterday to give a ray of hope to its investors, waiting for the High Court hearing scheduled on November 29.
Pertaining to the changes the deal will possibly introduce, Hyflux Ltd has offered its retail investors payouts. However, some investors will remain at a loss as they will only get a fraction of their investment.
Speaking to the reporters at a teleconference yesterday, Chief Executive and Founder, Olivia Lum said, “We just signed a restructuring agreement, we have to focus on completing the restructuring as soon as possible. The rest will be discussed over next few months.”
The suggested restructuring deal will extend the working capital line of Hyflux from existing $300 million to $400 million. The Singapore based firm, will use the proceeds for paying professional advisers’ fees. As stated by the Lead Adviser for Hyflux Ltd, Manoj Pillay Sandrasegara, “The senior unsecured creditors are to be allocated $250 million in settlement of all the senior debt of Hyflux. The retail holders of perpetual securities and preference shares (PNP) would receive payment in the range of $50 million to $100 million.”
If the scheme is passed, Hyflux claims, the restricting deal will be implemented by Q2 2020. The deal allows nearly 34,000 PNP investors (owning $900 million in total) to choose between receiving payment upfront or receiving it in half-yearly intervals in the four-year period. The former choosers will be given 50 percent value of their debt security holdings.
Stated by the CEO of Securities Investors Association of Singapore, “We have always been against judicial management or liquidation which brings no benefit at all to retail investors.”
Having terminated the restructuring deal with Indonesian consortium SM Investments in April 25, the Utico deal is important for Hyflux, specially as it is coming after six moratorium extensions.
Speaking about the deal yesterday, the Associate Professor at National University of Singapore said, “The increase in Utico’s stake is likely “compensatory in nature” after taking into account factors like asset depreciation.”
Another announcement made by Hyflux Ltd yesterday revealed that its subsidiary (Hyflux International Pte Ltd) has been released and discharged from all obligations, duties, rights, claims and demands under a contract for a desalination package in Iran.
As per the deal, the subsidiary was supposed to design, manufacture and supply a seawater reverse osmosis desalination package in Bandar Abbas, Iran. The project was awarded to HIPL by an Irani firm, Asia Water Develpoment Engineering Company in April 2018, but had to be suspended in October 2018 post the US sanctions on Iran.
In the High Court hearing to be held on December 2, Hyflux Ltd is to give a progress update on the same.
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