Hyflux, a home-grown firm that won accolades in the 2000s for its entrepreneurial chief executive, has applied to the Singapore High Court to begin reorganising its liabilities and businesses, as it tries to find room amid the prolonged weakness in Singapore's power market to carry on with business.
Yesterday, the water treatment firm said it and five of its subsidiaries - Hydrochem (S), Hyflux Engineering, Hyflux Membrane Manufacturing (S), Hyflux Innovation Centre and Tuaspring - had entered a court application that automatically qualifies them for protection under a 30-day moratorium against their creditors' claims.
The firm has appointed WongPartnership as its legal advisers and Ernst & Young Solutions as its financial advisers.
In the weeks to come, Hyflux and its subsidiaries will seek approval from the court to extend the moratorium for up to six months, it said.
In a letter to shareholders, Hyflux's executive chairman and group chief executive, Ms Olivia Lum, said in taking a step back to "assess holistically" how to reorganise its liabilities, the group stands to protect the viability of its core businesses and position itself for long-term growth that is sustainable.
She said the main objective of the exercise was "to provide much needed space and time for the group to focus on its ongoing discussions with strategic investors, optimise operations, target areas for growth and complete our projects to keep generating steady cash flow".
It will continue to be business as usual on the ground, she added.
"We remain committed to our clients and key stakeholders, whom we will engage and work closely with throughout this reorganisation so as to achieve the best possible outcome in these challenging circumstances."
Hyflux was founded by Malaysia-born Ms Lum, who left a plum job at Glaxo Pharmaceuticals in 1989 to set up Hydrochem, the precursor to Hyflux, at the age of 28.
Success followed when in 1992, Hydrochem obtained the exclusive rights from a supplier to distribute membranes and membrane filtration plants to industrial customers. Hyflux listed on the Singapore Exchange in 2001.
Ms Lum's achievement was widely recognised.
She served as a Nominated MP between 2002 and 2005.
In 2011, she became the first Singaporean and the first woman to win the prestigious Ernst & Young World Entrepreneur of the Year award.
With the court application, Hyflux will stave off the repayment of liabilities accruing as of yesterday, in favour of freeing up cash flows for the purpose of paying critical suppliers and creditors to move forward on two projects in Oman and Singapore.
The firm is also seeking extra time to divest its Tuaspring project in Singapore and the Tianjin Dagang plant in China, which have taken longer to materialise and added stress to its cash flows.
It posted a net loss of $22.21 million for the three months ended March 31, and its net cash flow from operating activities for the quarter was negative $51.18 million.
The loss-making desalination and power plant, Tuaspring, weighed down Hyflux's bottom line in the first quarter. Excluding Tuaspring, it earned a net profit of $1.04 million.
A delay in securing buyers for Tuaspring and other assets also did not help. As a result, Hyflux said in March that it would not redeem perpetual securities reaching their first call date in April. The move resulted in a step-up of the coupon yield on these perps from 6 per cent to 8 per cent per annum.
The firm has $1.3 billion of net borrowings against $1 billion of total equity as of March 31.
At its peak in 2010, Hyflux had a market worth of nearly $2.1 billion. That has fallen to $165 million.
Hyflux's woes were linked to depressed prices in an over-supplied electricity market. That has seen improvement of late, with the firm pointing to an increase in wholesale electricity monthly prices since January.
The firm has thus sought court protection under Singapore's updated debt restructuring law, which incorporates elements providing more room for rehabilitation of companies facing financial distress.
A WongPartnership spokesman said the enhanced restructuring regime "is conducive to pursuing a swift and collaborative outcome... for home-grown successes like Hyflux, whose business continues to be relevant for Singapore's future economy".