Hyflux receives $205m investment proposal from US fund manager

Hyflux has received a formal expression of interest from an American fund manager to invest at least $204.78 million, the water treatment company said in a regulatory filing two days before an application to put it under judicial management will be heard.

Delaware-based Strategic Growth Investments (SGI) proposed the funds to be injected as newly-issued common equity into Hyflux, and to be applied to settle all debts, claims and liabilities of the group.

Senior unsecured creditors will get the lion's share of $97 million, trade creditors $15.78 million and the perpetual securities and preference shares (PnP) investors $32 million - all on a pro-rata basis, proposed SGI.

Also, it was proposed that $60 million from the investment be set aside for working capital and any future corporate restructuring, based on the value creation plan designed and implemented with SGI's advisers.

The Hyflux announcement to the Singapore Exchange (SGX) yesterday came two days before the High Court hears the judicial management application by the unsecured working group of banking creditors.

Hyflux's latest suitor SGI is prepared to offer up to 15 per cent of the equity in the treatment company post-investment in the form of warrants, with 5 per cent of the equity going to the senior unsecured creditors and 10 per cent to the PnP holders.

Assuming the successful implementation of SGI's value creation plan, the value of the equity warrants could be worth about $196.7 million for the senior unsecured creditors and $393.3 million for the PnP holders, according to the expression of interest letter.

According to SGI, its principals have invested in, owned and created value for companies across several verticals, including technology, industrials/ manufacturing, infrastructure and energy.

This latest development follows Hyflux asking its Middle Eastern suitor Utico to address concerns flagged by creditor groups, before a virtual townhall can be held for the company's PnP investors.

In this way, the townhall will be useful, its independent director Lau Wing Tat said in a letter to Utico released to SGX last Friday.

Mr Lau also highlighted that the Securities Investors Association (Singapore), or Sias, does not intend to endorse Utico's offer based on its current terms, and that Utico has yet to convince the medium-term note informal steering committee and/or the unsecured working group (UWG) to support its current offer.

Hyflux's letter referred to an Oct 9 Utico letter, in which Utico asked Hyflux to arrange a virtual townhall with PnP investors on either last Saturday afternoon or Sunday evening.

The Utico letter noted Sias had received "few responses" to its letter to PnP investors on Sept 25, which was based on Utico's offer on July 23.

Among other things, Utico noted last Saturday that "Hyflux (on Saturday) delayed the PnP virtual townhall to give Pison time to make an offer to PnP working with Sias".

Pison Investments is among other potential Hyflux suitors.

But Sias "issued a letter to Hyflux on Oct 7 that there are no offers to PnP other than Utico", it added.

Utico also said in Hyflux's own statement, "UWG has asked Pison to ensure PnP agrees to their offer, prior to UWG engaging with investors, including Pison".

Utico said: "Three representative sample votes from PnP have given majority approval for Utico's offer so far - the only approvals Hyflux has received for any offer to PnP."

THE BUSINESS TIMES