THE rescue deal that Hyflux intends to put to a creditors' vote on April 5 does not have the endorsement of Salim-Medco, the Indonesian investor group led by billionaire Anthoni Salim reiterated on Thursday.
"The allocation set out in the schemes of arrangement proposed by Hyflux is not agreed. Therefore, the schemes do not satisfy the conditions of the restructuring agreement," Salim-Medco (SMI) said in a statement issued to the media.
SMI and Hyflux shook hands on a rescue deal in October last year, with SMI agreeing to hand the insolvent water treatment firm a S$530 million lifeline in exchange for a 60 per cent stake in Hyflux once all its debts had been cleared.
But in a late surprise on March 18, SMI gave its first signal that it does not intend to see the deal through.
SMI's statement on Thursday began: "SMI recently become aware of new material information on the Hyflux group that significantly increases the working capital requirements of the group.
"In light of the new material information disclosed to SMI, it has been reviewing the allocation of the investment for the working capital requirements of the Hyflux group. This will in turn affect the amount available for settlement to creditors."
SMI continued: "Had this material information been disclosed earlier, it would have been taken into consideration in the allocation previously discussed with creditor groups. Under the restructuring agreement (signed on Oct 18 last year), the allocation of the investment between working capital and the amount available for settlement to creditors is to be agreed between Hyflux and SMI."
The current allocation has not been agreed upon by SMI, it said, and does not satisfy the conditions of the deal.
In contrast, Hyflux said on Tuesday that the S$271 million it plans to carve out from SMI's potential cash injection to settle its debts with creditors was agreed upon by SMI prior to the publication of the schemes on Feb 16.
Even with the latest rebuttal from SMI, Hyflux itself is unsure if the Indonesian group intends to renegotiate a rescue deal under different terms, or call off talks entirely.
A Hyflux spokesman told The Business Times on Thursday night: "Parties are not yet in talks. Hyflux has reached out to SMI a few times to start a constructive and meaningful conversation on the recent positions they have adopted in respect of the restructuring deal but SMI has not been available to meet."
The spokesman added: "In the latest correspondence received from SMI yesterday, SMI stated that they will comply with the terms of the restructuring agreement and expect Hyflux to do so the same... Hyflux will be seeking a direct answer from SMI as to whether they will call off the deal regardless of the differing legal positions of the parties."
When asked by BT, SMI said it "will not be making further comment at this stage."
In any case, Hyflux has maintained that it will proceed with the scheme meetings as planned. "They (SMI) have not told us what they intend to do in the event that the court sanctions the schemes... Hyflux will reassess the plan moving forward as and when SMI reveals its true intentions."
Asked if Hyflux would consider appealing to the High Court for more time to sort out its disputes with SMI, Hyflux replied: "Until such time SMI is ready and willing to have a candid conversation with Hyflux, it is difficult for Hyflux to consider and decide on alternative causes of action."
Hyflux currently enjoys a reprieve from creditors under a debt moratorium granted by the court. This ends on April 30, whereas Hyflux's restructuring agreement with SMI has a long-stop date of April 16. Unless SMI wants to extend the long-stop date, there isn't enough time for parties to take a time-out to sort out differences, Hyflux said.
SMI first asserted its right to walk away from the deal on March 18.
On March 5, Singapore's national water agency PUB served a default notice to Hyflux's key subsidiary, Tuaspring, seeking remedy for both operational and financial defaults.
SMI has taken the position that PUB's default notice constitutes a "prescribed occurrence" that allows it to call off the rescue deal.
On the other hand, Hyflux has argued that a prescribed occurrence would only take place if PUB terminates its water purchase agreement with the Tuaspring water desalination plant. Such an event has not yet taken place, and the earliest that PUB can exercise its right to terminate the water contract - if Tuaspring's defaults are not remedied - is on April 6 (after the scheduled scheme meetings on April 5), Hyflux said.
On Thursday, SMI added that it has issued Hyflux a notice to remedy another "prescribed occurrence", this time relating to Hyflux's Magtaa desalination plant in Algeria. The offtakers in Magtaa's water purchase agreement had issued a termination notice to Hyflux in Dec 25 last year.
However, this was only disclosed to SMI on March 19, almost three months later, it said.
SMI also noted that arbitration proceedings were commenced against Hyflux in relation to the Souk Tleta desalination plant on March 22.
Separately, BT asked the National Environment Agency (NEA) how the recent developments might affect its position with respect to the TuasOne waste-to-energy plant that Hyflux is building under a Design-BuildOwn-Operate scheme for NEA.
An NEA spokesman said: "Construction of the TuasOne project is more than 95 per cent complete, and works are still continuing. The NEA has been working closely with the shareholders of TuasOne, namely Hyflux and Mitsubishi Heavy Industries, as well as the financial institutions involved, to see the project through this final phase of its construction. Meanwhile, we have sufficient incineration capacity to meet our needs."