HYFLUX SAGA

Hyflux in talks with seven parties; aims to pick suitor by mid-June

If all goes according to plan, the court-sanctioned restructuring process will be completed in September, according to timetable laid out by CEO Olivia Lum in May 27 affidavit

Singapore

HYFLUX is in talks with seven different parties for a potential cash infusion, and plans to enter into a binding term sheet with one of them by mid-June.

The distressed water cleaning firm will meet stakeholders and draw up terms of a restructuring scheme by the end of June, and aims to apply for leave to convene scheme meetings for creditors in July.

If all goes according to plan, the scheme meetings will be held in late August, and the court-sanctioned restructuring process will be completed in September.

This was the timetable laid forth by Hyflux chief executive Olivia Lum in a May 27 affidavit that was read in a Singapore High Court on Wednesday.

On Wednesday, Justice Aedit Abdullah extended Hyflux's debt moratorium by two months to Aug 2. Hyflux had sought a four-month extension until the end of September.

DBS Bank and the Securities Investors' Association (Singapore) expressed support for a four-month extension. SIAS is in contact with many of Hyflux's junior creditors through e-mails, small group and townhall meetings. Other creditors called for tighter timelines ranging from 30 days to three months.

Once again, Justice Aedit stressed that Hyflux needs to be kept on a tight leash, saying: "I am concerned about giving four months at one go. I will grant a two-month extension at the moment but I can indicate right now that I am able to extend further depending on what progress there is."

The Court will hear an update on Hyflux's restructuring process on Aug 2, and Hyflux can apply for its moratorium to be extended then.

So far, Hyflux has named two potential suitors.

It is in advanced discussions with Emirati utilities group Utico over terms of a binding term sheet, for a possible investment of S$400 million, it said.

Hyflux is also in advanced discussions with Mauritius-registered Oyster Bay Fund for a possible S$500 million investment. Hyflux said that Oyster Bay is an independent third party, but has not disclosed who is behind it.

Five other unnamed investors are in talks with Hyflux and have signed non-disclosure agreements.

Among the five is a large desalination firm that has issued Hyflux a non-binding letter of interest to acquire certain of its assets in Algeria, Oman, the Middle East and the North Africa region; a large player in the power sector in Asia that is mulling a possible merger with Hyflux; a foreign investment fund that invests in distressed companies; a major nuclear and civil engineering contractor based in Asia; as well as a major waste treatment company based in Asia.

Hyflux has prioritised discussions with those investors who are willing to keep the Hyflux group intact, as opposed to those who prefer to "cherry-pick" parts of its business, WongPartnership lawyer Manoj Sandrasegara, who represents Hyflux, told the court on Wednesday.

Meanwhile, the Court has directed Hyflux to give creditors cashflow updates on a monthly basis, as well as a detailed breakdown of the running costs of the company over the course of the restructuring.

These figures were sealed from the public, though Mr Sandrasegara revealed that Hyflux's monthly running costs have fallen by 60 per cent since March last year. Part of the reduction comes from employee attrition and the company giving up its premises, he said.

Hyflux has also agreed to host meetings with senior unsecured creditors, together with the advisers and informal steering committees for junior creditors, every Friday.

The regular agenda items at these meetings will include liquidity management, developments on key projects and asset sales. The first of these meetings took place on May 17, Hyflux said.

On Wednesday, Mr Sandrasegara also addressed the question of why Hyflux needs two financial advisers.

EY had led Hyflux's restructuring process until nTan Corporate Advisory was hired last month, after a rescue deal struck with billionaire Anthoni Salim was called off.

Mr Sandrasegara said: "The role played by the nTan team and the EY team are fairly divided. As the restructuring goes on, there is more of a liquidity crunch, cash has to be managed very carefully, management of operations gets very challenging because of employee attrition."

While EY plugs these operational cracks, nTan is driving the restructuring process forward by bringing with it fresh investor networks, he explained.

Separately, Hyflux and DBS complained on Wednesday that Cosimo Borrelli of Borrelli Walsh, the financial adviser to certain bank lenders, had broken away from the group to engage with Utico unilaterally, and has been evasive about the contents of those discussions.

Mr Sandrasegara noted that Mr Borrelli has been very clear about his lack of confidence in Hyflux's board and management, and may undermine the restructuring effort. He said: "It's like sending the angel of death to meet the investors. He is not the right ambassador to meet the investor."

Justice Aedit said that he "strongly encourage(s)" all advisers to leave the details of negotiations to Hyflux, unless they strongly feel their clients' interests are affected.