SINGAPORE: After months of negotiations, beleaguered home-grown water treatment firm Hyflux has confirmed a S$400 million restructuring deal with United Arab Emirates utility company Utico.
In an announcement on Tuesday (Nov 26), Hyflux said Utico will subscribe to 95 per cent of its enlarged issued share capital for an aggregate subscription amount of S$300 million, via private placements.
Advertisement Advertisement It will also grant the firm a working capital line of up to S$100 million, subject to the terms and conditions of a working capital line agreement to be entered into between both parties.
While the total investment amount remains the same, this new deal will see Utico, which has been locked in talks with Hyflux for months now, take a larger stake in the embattled local company.
In its original investment offer in July, Utico had said it would take an 88 per cent stake in Hyflux through S$300 million in equity injection and a S$100 million shareholder loan.
Under the schemes of arrangements laid out on Tuesday, S$250 million will be paid “pro rata” to the unsecured creditor group.
Advertisement Advertisement For retail investors holding on to Hyflux’s preference shares and perpetual securities, they have two options.
The first is to receive an upfront cash payment “of an amount equal to the lesser of S$1,500” and 50 per cent of their investments. The principal amount payable under this option will be capped at S$50 million.
The second is to receive a cash amount “equal to the lesser of S$1,500” and 50 per cent of their investments that will be paid out over two years in five equal instalments with a yearly interest of 1.25 per cent. There will also be a cap of S$50 million for the principal amount payable under this option.
In addition, there is an additional cash amount that will be paid on a “pro rata basis” to investors who opt for the second option.
According to the announcement, if shares of Utico or an affiliate are listed within two years of the deal’s completion date, this amount will be the higher of either the cash equivalent of 4 per cent of the issued share capital at the listing price, or S$50 million.
If such a listing does not occur within two years, the amount will be S$50 million.
The amount set aside for the retail investors, excluding the additional cash amount, will come from the working capital line, the announcement said.
The remaining balance of the investment amount and working capital line will be used for the payment of subsidiaries trade debt, professional advisers' fees based on terms agreed between Utico, Hyflyx and each of the relevant advisers, as well as the working capital needs of the Hyflux group, among others.
Hyflux will seek the court’s leave to convene the meetings of creditors to approve the schemes of arrangement.
Further details will be set out in a circular that will be despatched to its shareholders in due course, the announcement said.
[h=3]READ: From making waves to drowning in red ink: Hyflux, Tuaspring and how a business giant came undone[/h]This is Hyflux’s second restructuring agreement since it applied for a court-supervised debt restructuring in May 2018.
Founded in 1989, Hyflux made a name for itself with its proprietary membrane technology and was regarded one of Singapore’s most successful business stories, before a heavy reliance on borrowing and a failed venture into power generation hurt its finances.
Over the past year, the home-grown firm has been granted six moratorium extensions – with its latest granting it reprieve from creditors until Dec 2 – while it works on securing a rescue investor to meet nearly S$3 billion in liabilities.
It had reached a S$530 million deal with Indonesian consortium SM Investments last October, but that arrangement fell through in April.
Hyflux then began negotiations with other potential investors, including Utico.
[h=3]READ: Our coverage of the Hyflux saga[/h]"Utico was identified by the company through the new investor search process which was commenced following the earlier termination of the proposed investment by SM Investments," the announcement said.
Utico is a developer of water and power infrastructure in the Middle East region, and is also the largest full service private utility company in the UAE, it added.
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