Hyflux yesterday aborted a key investment deal with would-be saviour SM Investments (SMI) and cancelled a critical creditors' vote scheduled for today, throwing its own future into doubt. The beleaguered water treatment firm also cancelled a scheme meeting next Monday and an extraordinary general meeting scheduled for April 15.
Hyflux, whose Tuaspring desalination and power plant is a key source of water supply for Singapore, has liabilities in excess of $2.6 billion and had earlier agreed to sell a majority stake in the restructured company to SMI in exchange for a $530 million investment. Yesterday, that plan fell apart.
In a Singapore Exchange filing, Hyflux said it "has no confidence that (SMI) is prepared to continue to complete the proposed investment, even if all outstanding conditions precedent under the restructuring agreement" are fulfilled. This came after SMI "declined to provide Hyflux with such written confirmation that it will proceed to complete the proposed investment", Hyflux said.
With just weeks to go before its debt moratorium runs out on April 30, Hyflux said SMI has "repudiated the restructuring agreement" which, it said yesterday, is now terminated. "Hyflux intends to take all necessary action in connection with such termination," it added.
This means that Hyflux subsidiary Tuaspring must settle its defaults by today or the desalination plant will face getting taken over by water agency PUB for zero dollars. PUB is doing this to secure Singapore's water supply and will waive any compensation payable by Tuaspring if PUB terminates the water purchase agreement.
SMI said it was "surprised by the action taken by Hyflux". It had said last week it was reviewing the amounts that needed to be set aside for working capital needs and to settle creditors' claims, and blamed Hyflux for delaying its disclosure of "material information".
Hyflux maintained SMI agreed to allocate $271 million to settle debts with creditors, but SMI denied this.
Apart from earlier asking Hyflux to remedy threats to Tuaspring and its Magtaa plant in Algeria, SMI also claimed yesterday it had been informed of a threat to a third major project only on Wednesday.
In a separate statement last night, Hyflux rebutted SMI, saying that it "cannot possibly be surprised" by the termination of the agreement when the basis for doing so was its "repeated refusal to commit to making the investment necessary for the restructuring". It also disputed SMI's other allegations, saying they were unfounded.
Hyflux said it will "continue to relentlessly pursue all other viable strategic opportunities" as part of its court-supervised restructuring.
But time is running out. "Barring a new investor emerging before the court moratorium ends on April 30, we think the likelihood of a liquidation has increased," said OCBC Investment Research.
Meanwhile, the company's 34,000 retail investors stand to lose all of the $900 million they invested in Hyflux in a liquidation scenario.
Hyflux preference shares investor L.H. Tay, who invested $100,000 in the instruments, told The Straits Times that he was not surprised by the latest twist.
Mr Tay said: "There are too many regulators involved, which meant higher chances of SMI walking off the deal. It will get even more messy and the claims will be higher, and the chances of Hyflux's survival even slimmer."
Securities Investors Association (Singapore) chief David Gerald said he has contacted Hyflux founder Olivia Lum. "She said that the board needs some time to negotiate with interested parties and has asked that they be given some time and space to work on an alternative proposal to avoid liquidation," he said.