Former white knight SM Investments (SMI) said yesterday that it will be suing debt-laden Hyflux for cancelling the $530 million rescue deal that SMI had offered.
The move means both Hyflux and SMI will be making a grab for the $38.9 million deposit that was placed in escrow by SMI for the restructuring agreement.
In its statement, SMI said it had not accepted the water treatment group's "purported termination" of the investment deal on April 4, adding that it ended the deal only yesterday in accordance with the terms of the agreement.
The investor group said its decision to end the deal was based on several "termination events".
It said Hyflux had wrongfully tried to walk away from the rescue deal through its actions on April 4. "This was a repudiatory breach of the agreement by Hyflux entitling SMI to terminate the restructuring agreement," it said.
Hyflux had also failed to meet the April 16 deadline to satisfy various conditions, including obtaining a sanctioned scheme of arrangement to settle the amount owed to creditors. SMI said this failure meant that the agreement would automatically cease to operate.
The arrangement was supposed to be put to a vote by Hyflux's stakeholders in two days of scheme meetings, but Hyflux called off the vote before the meetings could take place on April 5 and 8.
SMI said issues at Hyflux's three projects - Tuaspring, SingSpring and its Algerian desalination plant Magtaa - have not been remedied.
On Wednesday, national water agency PUB issued a notice to Tuaspring Pte Ltd saying it would take back the desalination plant at zero dollars after 30 days.
"Each of the termination events entitles SMI to a refund of its deposit in accordance with the restructuring agreement," said SMI, adding that it rejects Hyflux's accusations made on Monday that SMI had reneged on the deal.
Hyflux previously said it had pulled out of the agreement because of SMI's "repeated refusal to commit to making the investment necessary for the restructuring", and it fired the initial salvo by suing SMI first.
Even if Hyflux is awarded the $38.9 million deposit, it is a drop in the ocean considering its $2.95 billion debt as of March 31 last year.
Hyflux said it could not comment on SMI's latest statement as the allegations are part of its suit against the investor group.
Singapore Management University law don Eugene Tan said it is difficult to tell which side has a stronger case as both have lobbed many accusations at each other.
Associate Professor Kevin Koh of Nanyang Business School, said that these legal actions could also be "an additional distraction for any potential white knight as it is uncertain how long the lawsuits will play out".
Yesterday, Hyflux disclosed in an early morning filing to the Singapore bourse that a collaboration agreement with Maybank, Tuaspring Pte Ltd's only secured creditor, had been terminated. The agreement had allowed Maybank to take part in the divestment process with any white knight investor of Tuaspring, in exchange for not starting any enforcement action against the Hyflux subsidiary.
A spokesman for Maybank said two events - PUB's notice of takeover as well as a missed March 31 deadline for Hyflux to carry out a rescue deal - had prompted it to end the collaboration agreement.
In a letter from Maybank's solicitors, the bank had stated its intention to appoint receivers and managers for Tuaspring assets, apart from the desalination plant. Many investors believe the power plant portion of Tuaspring holds value, given that it is still operational.
But the Maybank move could end the retail investors' hopes of recovering some of their investments through the power plant. This is because if Tuaspring is liquidated, Maybank has the first right to recovery before other unsecured creditors and retail investors.
It is unlikely there will be any excess proceeds from a distressed sale of Tuaspring to repay anyone other than Maybank, noted Prof Koh.
Time is running out for Hyflux as the court-sanctioned debt moratorium that protects the firm from its creditors expires on April 30.