SINGAPORE - The sword finally fell on Hyflux when the High Court ruled on Monday afternoon (Nov 16) that the beleaguered water treatment firm will come under judicial management (JM) with immediate effect following an over-two-year-long debt restructuring attempt.
This means that Hyflux founder Olivia Lum and the rest of the board will no longer be in control of the company, as appointed judicial managers Hamish Alexander Christie and Patrick Bance of Borrelli Walsh have taken over the company’s operations on Monday.
The restructuring firm had been advising a large creditor - the unsecured working group (UWG) of 19 banks that hold more than $931 million of Hyflux debt. Hyflux also owes about $900 million to 34,000 retail investors holding its perpetual and preference shares (PnPs).
Sources told The Straits Times that representatives of Borrelli Walsh were at Hyflux's premises on Monday to take control, change locks and check computer servers.
This is even as Hyflux's lawyers and some creditors support a further short extension of the debt moratorium in view of a plan proposed by American fund manager Strategic Growth Investments (SGI) to acquire and privatise it in a deal that would include a cash injection of $208 million.
But Justice Aedit Abdullah ruled on Monday: "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... but this has not been the case here.
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 2½ 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 already 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 a further extension were the medium-term note (MTN) 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 judicial management, mainly 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".
"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 is interested in investing in the business of Hyflux and (SingSpring) have been brushed aside as 'lock and sell' deals," Mr Ng said.
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 advisor fees chalked up by the company," he said.
Mr M. Anthony, 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",” he said.
Trading of Hyflux shares has been suspnded since May 2018 when it filed for bankruptcy protection.
Timeline of key events
• Feb 23, 2017: Hyflux's Tuaspring power and desalination plant fails to turn a profit.
• Feb 27, 2018: It reports a net loss of $116.4 million for FY2017.
• May 22, 2018: Hyflux files for bankruptcy protection, gets automatic 30-day moratorium. All shares and securities trading is suspended.
• April 2019: Hyflux's $530 million rescue deal with Indonesian consortium SM Investments falls through.
• April 16, 2019: Financial regulators announce review of Hyflux's disclosure and accounting practices.
• May 18, 2019: National water agency PUB takes over Tuaspring desalination plant.
• Nov 26, 2019: Hyflux reaches agreement with Middle Eastern utility firm Utico over $400 million rescue deal.
• May 29, 2020: Hyflux says rescue deal with Utico has "ceased" as the restructuring agreement’s long-stop date had lapsed on May 26.
• June 2, 2020: The Singapore authorities say they are investigating Hyflux over corporate governance breaches. Among the directors under probe is Hyflux's executive chairman, Ms Olivia Lum.
• July 9, 2020: Hyflux gets a new $485 million cash and stock offer from Middle Eastern utility firm Utico.
• July 27, 2020: A group of bank lenders succeed – on their second try – in getting the High Court's approval to file an application to put Hyflux under judicial management.
• August 4, 2020: Utico extends the deadline of its proposed rescue deal for Hyflux, this time by a month.
• Oct 14, 2020: The application hearing by the unsecured working group of banking creditors to put Hyflux under judicial management is adjourned by the High Court.
• Nov 16, 2020: The High Court rules that Hyflux will come under judicial management with immediate effect.