Hyflux rescue deal held up by differences within board: Utico

UAE utility firm says it has creditors' approval for Hyflux restructuring agreement

Amid conflicting accounts of the status of Hyflux's restructuring agreement, white knight Utico yesterday blamed alleged differences within the Hyflux board for the holdup in the signing of the rescue deal.

The differences involve advisers' fees, board representation and management oversight, the United Arab Emirates-based utility firm said.

Utico's latest statement came after Hyflux issued a clarification near midnight on Wednesday, saying the "definitive agreement has not been entered into by both parties, pending resolution on certain final outstanding issues in the draft definitive agreement".

However, Hyflux said that both parties are in "highly advanced discussions and will continue to engage with each other with a view to resolving such final outstanding issues and finalising and entering into the definitive agreement as soon as possible".

Utico said on Tuesday that it had "signed and released" a restructuring agreement with Hyflux on Monday that will give it 88 per cent of the water firm. But yesterday evening, Utico backpedalled on the statement. It said that it "already has creditors' approval for the restructuring agreement, which we consider a very significant development paving the way for a rescue deal for Hyflux".

When asked yesterday why Utico said there was a signed deal, chief executive Richard Menezes said: "Because Aug 26 was the deadline and creditors, noteholders had accepted the restructuring agreement."

The utility firm said the "outstanding issues... predominantly refers to internal board level issues, probably including differences over advisers' fees, which Utico has capped at $25 million in the restructuring agreement".

Mr Menezes said: "It is prudent that a swift resolution is found so that Utico and Hyflux can endeavour to mitigate... value erosion of the entity."

He added that Utico is "reinforcing (its) commitment to the Hyflux retail perpetual securities and preference (PNP)" shareholders, who he said could get "$50 million minimum to $150 million on the high side, depending on the options they choose".

The restructuring agreement would be a "first-of-its-kind proposition in the world where retail investors who are otherwise unsecured and have no mandatory cover to recover their investments have been integrated into the agreement with payout guarantees", he said.

But Mr Menezes warned that apart from "whittling down Hyflux value steeply, a delay in resolution will also be detrimental to the PNP (shareholders) who stand to lose all their investments if Hyflux's indecision leads to ultimate liquidation".