CREDITORS who want Hyflux put under a judicial manager (JM) will have to save their fight for another day.
On Tuesday, a Singapore High Court heard arguments from seven banks that have applied to be carved out of Hyflux's outstanding debt moratorium that is giving the insolvent company breathing space to restructure.
Hyflux's moratorium staves off creditors until May 29, so any creditor that wants to apply for a JM to be brought in before then must first get the court's approval for a carve-out.
Justice Aedit Abdullah did not approve the carve-out application but he did not dismiss it either. The merits of bringing in a JM "is dependent on ongoing efforts (by management to restructure Hyflux) and things may change", he stressed.
The carve-out application can be revived if circumstances change, he said: "I will leave this sword hanging over your head, and I hope it does spur things along. A moratorium is supposed to be a temporary solution to allow a company to put something together."
Hyflux has struggled to seal a rescue plan since it filed for court protection in May last year. But it cannot be given a "blank cheque", said Justice Aedit. "I will be keeping the company on a tight leash," he said.
During the four-hour hearing on Tuesday, Tan Kok Quan Partnership lawyer Eddee Ng, on behalf of lenders Mizuho, KfW, Bangkok Bank, BNP Paribas, CTBC Bank and the Korea Development Bank, expressed dismay at the advisory fees that Hyflux has racked up in its latest attempt to stave off liquidation.
Hyflux appointed nTan Corporate Advisory as an additional restructuring advisor last month after already hiring EY. The size of Hyflux's billable fees have never been disclosed to the public.
But Mr Ng, who had seen the engagement letter with nTan and is cognisant of the amount, described the fees as "breathtaking".
He was making a reference to a previous case which involved a fee dispute between nTan and its former client TT International. The Court of Appeal observed at the time that nTan's fee was "an extraordinary amount that will leave many breathless".
Opposing the carve-out were WongPartnership lawyer Smitha Menon for Hyflux, as well as Allen & Gledhill lawyers Andrew Chan, representing Maybank as agent for the syndicate of lenders to TuasOne, and Edward Tiong for DBS Bank.
They argued that the completion of the TuasOne waste-to-energy plant, which is being built for the National Environment Agency (NEA) under a Design-Build-Own-Operate scheme, is crucial for the restructuring.
Ms Menon said: "TuasOne is now 95 per cent complete... The structure of the EPC (engineering, procurement and manufacturing) contract is that you will only get paid S$300 million as a bullet payment at the end. Now is not the time to disrupt that."
Mr Tiong added that if TuasOne faces more delays, DBS is liable to suffer further liquidated damages of up to S$11 million per month.
Mr Chan said: "You are jeopardising the project if you are at the end of the day, delaying the project."
Mr Ng stood his ground, pointing to the inconsistency of statements made by various parties.
He noted that while the others had said that TuasOne is on the cusp of completion, Hyflux chief Olivia Lum had written in an affidavit that completion is expected in the first quarter of 2020, pending funding.
"This would mean we are at least three quarters of a year away from that particular completion... The company cannot possibly expect the creditors to wait another three quarters before taking any decision in this matter," Mr Ng said.
A great deal of time was also spent debating how the NEA might react if the Court allows the application for a JM to be filed.
Mr Tiong argued that it creates "a fresh and real risk" that NEA may terminate the waste energy services agreement and exercise its step-in rights. Mr Ng countered that there has been no assertion from NEA that it will do so.
The lawyers argued over interpretations of a written reply that NEA had given to Mr Chan when asked this month to confirm that an application for JM would not result in an adverse effect on the agreement and trigger the exercise of its step-in rights. In the letter, NEA noted that the project has been delayed, that it may be further delayed by a JM, and that it reserves its rights.
Justice Aedit said: "I don't want to read the minds of the NEA."
In response to arguments that a JM with no industry-specific expertise would set back Hyflux's restructuring plans, Justice Aedit said: "If the company is in the midst of nothing concrete, there is nothing for the JM to impact, is there?"
Hyflux is expected to apply to extend its moratorium by a few more months when the next court hearing is held on May 29.
But even if he agrees to let Hyflux have additional breathing space, it may not get as much time as it desires and there may be conditions attached, Justice Aedit warned on Tuesday. He said he would require that Hyflux disclose its running costs, including the costs of the restructuring process, to all creditors.
He would also like to be given a timeline of when Hyflux expects to complete its restructuring process, and the assurance of continuing engagement with various creditors.