White knights in the form of two giant Indonesian firms have thrown a $530 million lifeline to beleaguered water treatment company Hyflux.
Conglomerate Salim Group and energy giant Medco Group have entered into a binding agreement to invest the funds in Hyflux, it was announced yesterday after the market closed.
Their consortium, SM Investments, will own 60 per cent of the company once the deal has been completed.
Hyflux hit cash-flow problems earlier this year with total liabilities, including bank debt, at $2.95 billion as at March 31. It asked for a share trading halt on May 23 and embarked on a restructuring exercise. This involved Hyflux conducting a competitive bidding process for strategic investments in the business.
It entered non-disclosure agreements with 16 candidates and then narrowed the field to eight parties before the deal was struck with SM Investments yesterday.
SM Investments will subscribe for ordinary shares representing 60 per cent of the enlarged issued share capital in Hyflux for $400 million.
It will also grant Hyflux a shareholder loan of $130 million and a $30 million loan for interim working capital for the period leading up to the completion of the proposed investment.
The consortium has run diverse businesses in South-east Asia and other parts of the world, and has experience in owning and operating water, power and gas, and oil facilities.
Salim Group chairman Anthony Salim told a signing ceremony at Hyflux Innovation Centre last night: "I will make sure that the CEO of this company, the strong lady, is going to continue her leadership for a few years, if not more."
Medco Group founder Arifin Panigoro added: "Our aim is to further grow Hyflux, leveraging on its strength in system integration and optimisation of water treatment and waste management as well as in power generation."
SM Investments chief executive Arief Sidarto said: "Our view is that Hyflux as a whole should be kept together, and we believe we can grow it into a platform that all of us and Singapore can be very proud of."
Hyflux executive chairman and chief executive Olivia Lum said: "After a rigorous selection process, the board unanimously selected the Salim and Medco consortium as a strategic partner... They, like Hyflux, want everything to be intact; this is their intention."
Hyflux needs to get its bank lenders, note holders, preference share and perpetual securities holders on board via a scheme of arrangement before the $530 million is injected into the company.
Ms Lum noted earlier this week that secured lender Maybank had agreed to give Hyflux until Oct 29 to find a buyer for Tuaspring.
"We will have to engage Maybank... With this restructuring successfully proceeded, we will not attempt to sell any more assets," she added.