Beleaguered water treatment firm Hyflux has come under judicial management (JM) after a High Court ruling yesterday, following a marathon debt restructuring effort that has yet to put money on the table for creditors.
Mr Hamish Alexander Christie and Mr Patrick Bance of Borrelli Walsh, the restructuring firm advising the unsecured working group (UWG) of 19 banks that hold more than $931 million of Hyflux debt - were appointed the judicial managers and took over the firm's operations yesterday.
Sources told The Straits Times that representatives of Borrelli Walsh were at Hyflux's premises yesterday to take control, change locks and check computer servers.
Earlier in the day, Hyflux's lawyers and some creditors supported a further extension of the debt moratorium in view of a plan proposed by American fund manager Strategic Growth Investments (SGI) to acquire and privatise the company in a deal that would include a cash injection of $208 million.
But Justice Aedit Abdullah said that he was "not persuaded that sufficient grounds have been made out for any further extension".
"A debtor-in-possession restructuring... must come to an end at some point. A moratorium mechanism is not intended to be continued indefinitely."
It is meant to "give temporary reprieve" for companies to work out viable rescue plans, "but this has not been the case here", he stressed.
While acknowledging there have been "various complications" in Hyflux's restructuring, Justice Aedit said he was "not persuaded that the current SGI proposal is a basis for further continuation of the moratorium".
"I must emphasise that the moratorium has been in place for a very long time... So what may have been sufficient for an extension in the past... may not be sufficient when numerous extensions have been given. It is against that context that I must weigh the application for JM order and I'm satisfied that the statutory objectives... have been made for the appointment of JM," he ruled.
Despite being given 12 extensions of the debt moratorium over 21/2 years, the Hyflux board was no closer to getting a deal that puts money on the table, and some creditors feared the group's remaining value was being dissipated. Compounding matters, Hyflux and its current and former directors are now under probe for suspected false and misleading statements and breaches of disclosure rules.
Justice Aedit also denied Hyflux's request for a stay of the JM order pending its appeal.
Responding to Hyflux lawyer Nish Shetty's query if "time has been squandered", Justice Aedit said: "No, it's not about squandering... If any of you have had kids in (national service)... they would have ROD by now... You can get a degree in some countries in shorter time."
"Convince me why after two years, I need to give more time when there's nothing concrete on the table, no one is rushing to the bank to pour money in?" he added.
Among those supporting another extension were the medium-term note holders that are owed $265 million, creditor DBS and the Securities Investors Association (Singapore), or Sias. Lawyers for all three groups cited concerns that SGI will terminate the deal should Hyflux go into JM, because it has said that would "likely result in a prolonged process".
Mr Ashok Kumar of BlackOak, who represents the medium-term note holders, sought a month's extension, arguing that "if SGI walks away, there's no plan on the table".
But Tan Kok Quan Partnership lawyer Eddee Ng, who represents the UWG, opposed this, saying that Hyflux had ignored investors OUE and Keppel Infrastructure Trust that were recommended by Borrelli Walsh, while failing to deal with Pison, the investment vehicle of Indonesian magnate Johnny Widjaja, on an "arms-length basis".
Pison in July made a formal cash offer for the debts of Hyflux's bank lenders, note holders and other senior unsecured creditors via a "reverse Dutch auction".
Said Mr Ng: "While we see Hyflux has engaged Pison... which insisted on no JM and for existing management to be kept in place, genuine investors like OUE and Keppel, which are interested in investing in the business of Hyflux and (SingSpring), have been brushed aside as "lock and sell" deals."
Despite the regulatory investigations into potential offences for incorrect accounting, Pison still wants to keep the existing board in place. "Any arms-length investor should naturally be cautious," Mr Ng pointed out.
Further, he cited the depletion in Hyflux's assets and available cash, but said those numbers are "confidential".
"It is deeply ironic that Hyflux complains that a JM would be expensive. But whatever fees the JM charges will pale in comparison to the adviser fees chalked up by the company," he said.
Mr M. Anthony, 69, a retiree who bought 25,000 units of Hyflux's 6 per cent perpetual securities, is resigned to the fact that his investment has "gone up in smoke".
He hopes that "if there has been any wrongdoing or breaches of the law, the judicial managers will ring the alarm bells very loudly... for all to hear".