Beleaguered homegrown water treatment firm Hyflux is in the midst of securing a S$400 million binding deal with its potential white knight Utico, which will require the approval of the former’s senior and junior creditors.
The Straits Times reported Fri (12 Jul) that the United Arab Emirates utilities company is seeking to hold 88 per cent of Hyflux’s shares in return for a S$300 million worth of investment in equity and a S$100 million shareholder loan to Hyflux, as announced in a joint update with the Singapore Exchange on Thu.
Utico also intends to offer a 4 per cent stake in cash in the expanded Utico group, as well as extra cash to Hyflux’s retail perpetual securities and preference (PNP) shareholders. More details on Utico’s offer to PNP shareholders will be released before the next town hall.
Chief executive Richard Menezes told ST yesterday that Utico and Hyflux will obtain the approval of the latter’s senior and junior creditors “through meetings and votes”, despite an advisor’s earlier indication that the votes of junior creditors — around 34,000 seeking to recover S$900 million — are not necessary.
When asked as to why Utico has decided to include Hyflux’s junior creditors in the voting process, Menezes told ST: “We are white knight investors. Water and utilities are based on public necessity and should be based on ethics too… They (PNP investors) cannot be ignored, whether they have votes or not. It is ethical.”
Utico and Hyflux have also indicated their intention to commence “definitive documentation in respect of the proposed investment” as soon as possible, and to subsequently hold town hall meetings for the latter’s junior creditors “ideally before the next court hearing” on 2 Aug, by the end of the extended court-approved debt moratorium.
Previously, Utico had reportedly made a binding offer to invest S$400mil in Hyflux in May.
Reuters reported Menezes as saying on 12 May that Utico will provide Hyflux with working capital and any urgent interim funding as a part of the binding offer, and that it would negotiate the matter with Singapore’s national water agency Public Utilities Board and Hyflux’s retail investors.
“We are looking for the right deal that provides all stakeholders a satisfactory position in the company,” he added.
Prior to Utico’s entry in the Hyflux saga as a potential white knight, 42-year-old entrepreneur Li Meicheng, one of the junior securities holders who had channelled their savings into S$900 million of junior debt to fund Hyflux’s growth, told Bloomberg in Mar that amendments made to the restructuring plan at the time “hardly moved the needle”.
Similarly, 50-something homemaker Violet Seow, a shareholder and bond holder in Hyflux, told Bloomberg that she will most likely be voting against the new deal, as “Hyflux may not even survive that long for retail investors to collect any recovery”.
“We feel abandoned and sacrificed,” she lamented, adding: “The new investor isn’t a white knight when it only wants the assets but not the debt.”