SINGAPORE - The prospect of Indonesian white knight SM Investments riding to the rescue of debt laden Hyflux looks even more at risk after the dispute between the firms worsened on Thursday (March 28).
The latest blow to the $530 million bailout plan came in the form of a terse statement from SM Investments that suggested that Hyflux held back key information on the group's fragile financial state.
SM Investments said on Thursday that it had underestimated how much it would take to rescue Hyflux because of "new material information" that had come to light.
These chiefly concern the way $272 million - $271 million from SM Investments and $1 million from Hyflux - would be allocated to pay Hyflux's debtors.
"Had the material information been disclosed earlier, (SM Investments) would have taken into consideration in the allocation previously discussed with creditor groups," the company's statement said.
SM Investments had only recently come to know of information that will significantly increase Hyflux's working capital requirements, it added.
"In light of the new material information ... (SM Investments) has been reviewing the allocation of the investment for the working capital."
The review will "in turn affect the amount available for settlement to creditors".
Investors in the $900 million of unsecured perpetual securities and preference shares stand to lose about 90 per cent of their money under the rescue plan. It is not clear how SMI's review will affect the amount investors might receive.
The statement noted that a restructuring agreement signed last October stated that Hyflux and SM Investments must agree on how to allocate the financial injection.
But SMI does not agree with Hyflux's proposed allocation, so the agreement may not hold, the statement noted.
The Indonesian consortium also believes that it has grounds for walking away from the rescue deal given recent developments surrounding the Tuaspring power and water plants.
National water agency PUB has said that it will take over the Tuaspring desalination plant if Hyflux subsidiary Tuaspring Private Limited cannot rectify defaults by April 5.
That would also mean terminating a water purchase agreement that has underpinned the plant's commercial operations.
SM Investments has also demanded that the faults be fixed, presumably as it wants Hyflux to retain the plant as a revenue-generating asset.
Another point of contention involves a desalination plant in Algeria, whose water buyers have flagged their right to scrap a purchase agreement due to defaults at the facility.
SM Investments said it had only come to know of this on March 19, almost three months after the termination notice was issued to Hyflux on Dec 25.
Hyflux has disagreed with the SM Investments stance, noting on Tuesday (March 27) that PUB had yet to terminate the water purchase agreement it has with the Tuaspring plant.
It also said that it has been taking active steps to "amicably resolve" the matters in Algeria and the buyers are yet to terminate the purchase agreement.
If SM Investments "wrongfully terminates" the agreement, Hyflux would be able to lay claim to the $38.9 million deposit that was taken out of the proposed investment, it said in the filing.