United Arab Emirates-based utility provider Utico said it has "signed and released" a restructuring deal with Hyflux that will give it 88 per cent of the distressed water treatment firm.

The deal, which Utico said is worth up to $535 million, "finds a resolution for creditors and PNP (perpetual securities and preference) investors and development projects that have been languishing since the moratorium in May 2018", the utility firm said yesterday. It added that "swift action" will be taken to bring all projects up to speed and take on new projects.

But Hyflux yesterday declined to comment, saying that an announcement will be made in a filing with the Singapore Exchange.

The Securities Investors Association Singapore said it has not seen any signed deal.

Hyflux earlier said it would engage exclusively with Utico, with which negotiations have been the most advanced compared with other suitors, until Aug 26, the deadline for the parties to agree to a firm deal. The deal sees Utico taking the 88 per cent stake in Hyflux through a $300 million equity injection and a $100 million shareholder loan.

Asked how much each creditor class could get, Utico chief executive Richard Menezes said senior creditors stand to receive $250 million, while $100 million is earmarked for business growth and working capital.

The Hyflux retail PNP shareholders could get "$50 million, minimum, to $150 million, on the high side, depending on the options they choose".

But a failed deal earlier this year with SM Investments (SMI), an Indonesian consortium formed by Salim Group and Medco Group, has left a sour aftertaste.

Some analysts are sceptical that the Utico deal, which is subject to creditors' approval, will go through, citing talk that some senior lenders have asked the utility firm for proof of funds, third-party guarantees as well as details of how the restructuring plan will be implemented.

iFast senior fixed-income analyst Ang Chung Yuh noted: "After what happened with SMI, they want third-party guarantees to provide assurance that once the deal is signed, it's binding on all parties."

And even if the deal goes through, it is anyone's guess whether Hyflux will survive, he added.

But something is better than nothing, and Utico does offer a chance of a new lease of life, said Associate Professor Lawrence Loh, director of the Centre for Governance, Institutions and Organisations at the National University of Singapore Business School.

"Hyflux needs the capital to rejuvenate its engineering, procurement and construction business. Most of its current assets are depreciating, and it needs the cash to bring these up to par. It also needs to strengthen the management bench and do a critical evaluation of its operations, especially those that aren't making money. Can any of the existing assets be divested and can it take on new construction projects? What will it do with the Tuaspring co-generation power plant?

"Singapore may not be its main revenue generator in future because the market here is too small. So the new entity will have to look at the region for business and use Singapore as a springboard. And Hyflux can ride on Utico's plan to expand in Asia," Prof Loh said.

But first, the restructuring plan has to be approved by at least 50 per cent in number and 75 per cent in value of each creditor class. Unsecured creditors such as banks and medium-term note holders make up one creditor class; PNP shareholders make up another. Ordinary shareholders also need to give their approval.

And that may be the greatest hurdle for now, given the competing interests among the various creditor groups, Prof Loh added.