SINGAPORE (BLOOMBERG, THE BUSINESS TIMES) - Hyflux, in its third year of a debt-restructuring saga, said it is supporting a plan proposed by US fund manager Strategic Growth Investments (SGI) to acquire and privatise it in a deal that would include a cash injection of $208 million.
The debt-ridden water treatment company will work with SGI to "facilitate the adoption and implementation of this proposal by the various stakeholders on a timely basis," Mr Lau Wing Tat, a Hyflux director, said in a filing to the Singapore Exchange on Friday (Nov 14).
In a term sheet that was part of the stock exchange filing, SGI pledged an "augmentation of executive leadership," and said that it would replace Hyflux's board of directors entirely. Chief executive officer Olivia Lum would become non-executive chair of the advisory board.
A deal could help bring to an end to Singapore's most high-profile debt-restructuring case, which started in May 2018. Hyflux's debt includes bank loans and bonds held by 34,000 retail investors. Despite being approached by multiple suitors, the company has failed to reach an agreement and had sought several extensions on its debt moratorium.
Hyflux is facing claims totaling about $2.79 billion, some $1.03 billion of which is from holders of its perpetual securities and preference shares (PnP), the SGI term sheet showed. Banks are owed $630.7 million, according to the document.
Of the $208 million, PnP holders will get $41.3 million; medium-term note (MTN) holders, $26.2 million; banks and facilities, $56.8 million; other creditors, $14.8 million; contingent claimants, $53 million; while trade creditors will get $15.8 million.
The deal also includes newly issued equity and convertible securities.
The Securities Investors Association (Singapore), or Sias, said in response to the new deal that it is ready to work with all investors to support the PnP holders.
Sias president and chief executive David Gerald said: "Although the SGI term sheet is non-binding and conditional, it contains a proposal to resolve the debts due to all stakeholder groups, including the PnP holders.
"Sias' position is that it is prepared to work with any and all investors to help provide information to the PnP holders and facilitate a restructuring once a binding and unconditional offer is made in such time that the court may allow."
Mr Gerald noted that the cash payout marks a 4 per cent recovery for the PnP holders.
The term sheet is valid for 60 days, upon which time a binding letter of intent shall be issued and signed by all related parties. SGI aims to close the deal within 60 days of the execution of the letter of intent, it said.
SGI will terminate the deal should Hyflux go into judicial management, mainly because that would likely result in a prolonged process, Mr Michael Hong, chief investment officer of the US firm, said in a letter to Ms Lum, also filed to the exchange on Friday. Judicial management is a form of debt restructuring in which an independent manager is appointed to supervise the affairs, business and property of a company under financial distress.
Singapore's High Court on Oct 15 warned Hyflux against dragging out its restructuring process and said there would be no further adjournments on a hearing to decide whether it should be put under judicial control. The next hearing is Nov 16.
An offer from another would-be white knight Utico is the only one which isn't averse to a judicial management and plans to keep the company listed, according to a statement from a spokesman of the Middle Eastern utility. Utico will defend its position in the court hearing if asked to, he said.
Founded by Ms Lum and once heralded for its desalination technology in Singapore, Hyflux's expansion into the power-supply business led to ballooning debt that it couldn't repay. That left tens of thousands of retail investors in the lurch and prompted a rare public protest in Singapore.