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The tables have turned on the Salim-Medco Group as debt-laden water treatment firm and genco Hyflux decides to call off its rescue plan with the Indonesian conglomerate.
In an announcement on Thursday (4 Apr), Hyflux had also stated that it has cancelled the scheme meetings originally scheduled to take place tomorrow (5 Apr) and next Monday (8 Apr).
SM Investments (SMI), Salim-Medco’s Singapore investment arm, was quoted by The Business Times as saying on Thursday that it was “surprised” by Hyflux’s “purported termination” of their bailout agreement, and have started seeking legal advice following the firm’s move.
The consortium added that it “has been waiting for Hyflux to disclose further material information following multiple requests for such disclosure”, and that “the delay in disclosing this material information has prevented SMI from determining a workable allocation between working capital and the settlement amount to creditors under the restructuring agreement.”
Salim-Medco also highlighted that it has issued Hyflux “two notices to remedy threats to the Tuaspring and Magtaa projects” on 18 Mar and 25 Mar, which refer to the highly possible termination of Tuaspring’s Water Plant Agreement with the Public Utilities Board and “a notice from Magtaa’s offtakers to terminate its water contract”, BT reported SMI as saying.
“These threats have not been remedied,” said SMI, adding that in contrast, the consortium itself “has at all times abided by the restructuring agreement”.
Previously, Hyflux told Nikkei Asia Review on 18 Mar that the Notice to Remedy issued by Salim was in tandem with a clause stipulated in their bailout deal, “which gives the consortium right to terminate the restructuring agreement” by Apr 1 “on the basis that a prescribed occurrence has arisen”, reportedly referring to PUB’s announcement regarding its intention to seize the Tuaspring plant.
In its press release the same week, however, PUB claimed that Hyflux has “noted that PUB’s actions [concerning its potential takeover of Tuaspring at "zero dollars”]… would be favourable to” Tuaspring.
This is because, according to PUB, Hyflux suggested that the Board’s actions will lift “the pressure on the rest of the Hyflux Group”.
Consequently, the value of Hyflux and its shares will most likely observe a positive change as a result of PUB’s actions, according to the statutory board.
Hyflux will “relentlessly pursue all other viable strategic opportunities” to avoid liquidation, including possibly seeking a debt moratorium extension to High Court
Meanwhile, Hyflux reassured its shareholders that it will “relentlessly pursue all other viable strategic opportunities” in line with its court-supervised restructuring plan.
“The company intends to work closely with the key creditor groups and relevant stakeholders to find mutually acceptable bases to enable the company to pursue such alternative opportunities,” Hyflux said.
In the meantime, Hyflux will continue to exert ownership over the Tuaspring plant, and will likely make an appeal to the High Court in a bid to extend its time to find a new potential white knight.
However, an extension of Hyflux’s debt moratorium beyond 30 Apr is dependent on whether the High Court could find “strong reasons” that demonstrate the firm’s capacity to avoid liquidation and provide its creditors with a better alternative.
“There can be no assurance that the company will be successful in securing a new investor or in finding a viable alternative to execute the restructuring,” Hyflux said.
Securities Investors Association Singapore (SIAS) chief executive officer David Gerald told The Straits Times that he has contacted Hyflux founder Olivia Lum as to whether the firm has a backup plan or safety net for its stakeholders.
Mr Gerald said: “According to her, the board will quickly re-engage with previous interested parties who had shown keen interest and were bidding for Hyflux with SMI.
“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 added.
Additionally, Mr Gerald has conveyed to Ms Lum the “dissatisfaction” of the retail investors with the Salim-Medco bailout agreement initially, and had requested the company to consider the retail investors’ apprehension when discussing a new deal.
“In the circumstance, Sias calls on all stakeholders to allow Hyflux time and space to work out an alternate solution and support the board to provide the solution,” said Mr Gerald.
Hyflux, drowning in S$2.7 billion in liabilities as of the end of Sep last year, has given up on a “$380 million rescue package” from Salim, which was offered “in exchange for a 60% stake” in the water treatment company, as a result of the termination of the bailout deal with SMI.