Hyflux has finally reached a restructuring agreement with Utico that will see the United Arab Emirates utility take a 95 per cent stake in the embattled water treatment firm in a $400 million rescue deal.
The announcement yesterday comes just days before a High Court hearing scheduled on Friday to determine if Hyflux can get an extension on its debt moratorium, set to expire next Monday.
Retail investors have also been offered payouts - though in some cases these could be worth just a fraction of their investment.
Hyflux founder Olivia Lum told reporters at a teleconference yesterday: "We just signed a restructuring agreement, we have to focus on completing the restructuring as soon as possible. The rest will be discussed over next few months." She had been asked about her future role in the entity.
Under the deal, Utico will take a 95 per cent stake (including up to 7 per cent to be issued to independent placees) in Hyflux's enlarged share capital for $300 million. These placees could include institutions and high-net-worth individuals. It will also extend Hyflux a working capital line of up to $100 million. The proceeds will also be used to pay professional advisers' fees.
Hyflux had been looking for a white knight investor after an earlier rescue deal with Indonesian consortium SM Investments (SMI) fell through in April.
Utico, a developer of water and power infrastructure, and Hyflux plan to work to get creditors' approval of the restructuring terms over the next three to five weeks. To pass, the schemes of arrangement need to be approved by at least 75 per cent in value and 50 per cent in number of each creditor class.
Mr Manoj Pillay Sandrasegara, head of restructuring at WongPartnership and lead adviser for Hyflux, added: "The senior unsecured creditors are to be allocated $250 million in settlement of all the senior debt of Hyflux. The retail holders of perpetual securities and preference shares (PNP) would receive payment in the range of $50 million to $100 million."
He estimated that if everything plays out as planned, the scheme would be passed and implemented by the second quarter of next year.
Some 34,000 PNP investors, who are owed $900 million in total, can choose to either be paid upfront or to be paid in half-yearly intervals over a four-year period.
The PNP holders who opt for upfront payment will be entitled to receive up to 50 per cent of the value of their debt securities holdings, capped at $1,500.
Number of perpetual securities and preference shares (PNP) investors, who are owed $900 million.
Amount retail PNP holders are in line to receive, according to Mr Manoj Pillay Sandrasegara, head of restructuring at WongPartnership and lead adviser for Hyflux.
Those who opt for deferred payments, which will be paid in half-yearly intervals over four years, will be entitled to receive up to 50 per cent of the value of their debt securities holdings, capped at $1,500. They will also receive a pro rata share in an additional cash payout. If all PNP holders opt for the deferred payment option, the quantum of the additional cash payout will be $50 million.
A town hall for the PNP investors will likely be held by January, Securities Investors Association of Singapore founder and chief executive officer David Gerald said. "We have always been against judicial management or liquidation which brings no benefit at all to retail investors," he added.
Given that Hyflux's restructuring has dragged on for more than a year and a half, any type of closure is a good closure, iFast senior fixed-income analyst Ang Chung Yuh said.
"For the company, it will be good to get out of the current situation with a clean slate. For the senior unsecured creditors, this deal appears to be poorer because their recovery rate is lower compared with the SMI offer," Mr Ang said.
But he noted that the deal appears to be more favourable for PNP investors holding smaller investments. "If there are a sizeable number of small PNP investors, then the deal has a higher chance of passing, because the smaller their investment, the higher their recovery rate," he said.
Asked how confident Utico is about securing the PNP investors' approval, chief executive Richard Menezes said: "We are quite sure we have been more than fair."
Mr M. Anthony, a 68-year-old retiree who invested a little over $25,000 in Hyflux's 6 per cent perpetual securities, is resigned that his investment has gone up in smoke. "For the holders of Hyflux's 6 per cent perpetual securities, the present deal is no better than the one offered by SMI. It's really a joke," he said.
But Associate Professor Lawrence Loh of the National University of Singapore Business School believes many PNP investors will probably accept the deal "because in a liquidation scenario, the PNP investors stand to get nothing back".
"It's not the end yet. There are still many steps to clear before we can talk about Hyflux getting back to business," he added.
April 25: Hyflux chief executive Olivia Lum said a new white knight investor had emerged after it terminated a rescue deal with Indonesian consortium SM Investments (SMI) that would have injected $530 million into the firm.
The two companies could not agree on how much to allocate between paying Hyflux's debtors and boosting the company's ability to operate, which led to a tense relationship.
Ms Lum also said that she would draw a salary of $1 a year until Hyflux is successfully restructured.
May 24: Hyflux told the Singapore Exchange that it could get a $400 million lifeline from United Arab Emirates utilities provider Utico for equity and working capital purposes and possible urgent interim funding.
May 29: The High Court allowed Hyflux two additional months of reprieve from its creditors as the firm continued to work with several investors, including Utico, to nail down a new restructuring plan.
July 11: Hyflux and Utico said they were working towards a $400 million restructuring deal, which would require the approval of senior creditors and around 34,000 junior creditors trying to recover $900 million they had invested in the firm.
July 16: Utico CEO Richard Menezes said its offer for an 88 per cent stake in Hyflux is valued at $535 million, up from $400 million. The new amount is higher than SMI's initial offer of $530 million.
Aug 2: Utico warned Hyflux that it would walk away from the rescue deal if the water treatment company did not commit to a restructuring deal by Aug 16.
Mr Menezes said: "The value of Hyflux is falling."
The High Court allowed Hyflux to extend its debt moratorium for two more months.
Sept 30: The High Court granted Hyflux another two months of reprieve from its creditors to work with Utico and several other unidentified investors on a restructuring plan.
Oct 3: The High Court ruled that the original white knight investor SMI can assert its counterclaim for $38.9 million against Hyflux after a $530 million rescue deal was cancelled.
Oct 24: Utico said it would shrink its $300 million equity injection to $200 million if Hyflux did not sign the restructuring deal by the next week.
Oct 31: Utico issued a 48-hour ultimatum for Hyflux to agree to its version of the restructuring agreement or it would pull out of the deal.
Nov 26: Hyflux inked $400 million rescue deal with Utico, with the Middle Eastern company taking a 95 per cent stake in the water treatment firm. Its debt moratorium ends on Dec 2.