ANOTHER potential investor has deepened talks with Hyflux as the insolvent water-treatment firm searches for fresh funds to stave off liquidation.
Oyster Bay Fund, a global multi-strategy investment fund, is mulling an investment and has given Hyflux a non-binding letter of intent, the firm said on Friday.
As an indication of its good faith and intent, the fund is prepared to buy preference and ordinary shares in HyfluxShop Holdings from the company for up to S$26 million, Hyflux said.
If a definitive agreement is signed, this sum is expected to be used as working capital.
Hyflux said it "envisions" an investment of up to S$500 million in the Group by the fund, subject to regulatory clearance, due diligence and the execution of a definitive agreement.
HyfluxShop is the consumer water business in which Hyflux owns a 30 per cent stake. HyfluxShop used to be wholly-owned by Hyflux until February last year.
Back then, months before Hyflux filed for bankruptcy protection in May, Hyflux distributed 70 per cent of the shares of HyfluxShop to Hyflux shareholders via a dividend in specie, resulting in Olivia Lum, Hyflux's controlling shareholder, owning 23.8 per cent of HyfluxShop.
She then made a general offer to buy up the remaining HyfluxShop shares from the rest of the minority shareholders. At the time, HyfluxShop was valued at S$20 million, based on the price per share Ms Lum offered to pay.
At the same time, Hyflux also agreed to subscribe for S$20 million HyfluxShop preference shares with a 6 per cent annual dividend. (see clarification note)
Hyflux said on Friday: "The letter of intent (from Oyster Bay Fund) is stated to automatically terminate if a judicial manager or liquidator is appointed over the company."
Two weeks ago, Hyflux received a non-binding letter of intent from Emirati utilities group Utico. Discussions with Utico are based on a possible injection of S$400 million to be used for equity and working capital purposes and possible urgent interim funding, Hyflux said then.
During a hearing in a Singapore High Court on Tuesday, Hyflux was asked to give more clarity on its planned timeline for completion of a restructuring. Seven bank creditors have grown impatient and want to start a process to appoint judicial managers over the company.
WongPartnership lawyer Smitha Menon, who represents Hyflux, said she could not provide more clarity yet: "The investor (Utico) is doing due diligence. It's a moving timeline. We are dealing with information requests as well as negotiating a possible structure."
Hyflux said on Friday that it continues to engage with other parties who have expressed an interest to invest in the group. Priority will be given to parties willing and able to provide interim funding and reach a binding agreement with the company within the shortest possible time, Hyflux said.
Clarification note: Hyflux has clarified that the preference shares that Hyflux took in HyfluxShop last year was a non-cash conversion of existing intercompany loans extended to Hyfluxshop by Hyflux dating back to early 2016. Hyflux would like to add this statement: “The preference shares were issued at 6 per cent yield which reflects Hyflux’s coupon on its own preference shares, to reflect the arms-length nature of the transaction.”