Hyflux aborts investment deal with SM Investments
It also cancels critical creditors' vote, scheme meeting and EGM
Hyflux yesterday aborted a key investment deal with would-be saviour SM Investments (SMI) and cancelled a critical creditors' vote scheduled today, throwing its future in doubt.
The beleaguered water treatment firm also cancelled a scheme meeting on April 8 and an extraordinary general meeting scheduled for April 15.
Hyflux, whose Tuaspring desalination and power plant is a key source of water supply to Singapore, has liabilities in excess of $2.6 billion and had earlier agreed to sell a majority stake in the company to SMI in exchange for a $530 million investment. Yesterday that plan fell apart.
In a Singapore Exchange filing, Hyflux said it "has no confidence that (SMI) is prepared to continue to complete the proposed investment, even if all outstanding conditions precedent under the restructuring agreement" are fulfilled. This after SMI "declined to provide Hyflux with such written confirmation that it will proceed to complete the proposed investment", Hyflux said.
With just weeks to go before the company's debt moratorium runs out after April 30, Hyflux said SMI has "repudiated the restructuring agreement" which, it said yesterday, is now terminated. "Hyflux intends to take all necessary action in connection with such termination," it added.
The development means that Hyflux subsidiary Tuaspring must settle its defaults by today or the desalination plant will face getting taken over by water agency PUB for zero dollars.
PUB is doing this to secure Singapore's water supply and will waive any compensation payable by Tuaspring if PUB terminates the water purchase agreement.
SMI said it was "surprised by the action taken by Hyflux". It had said last week that it was reviewing the amounts that needed to be set aside for working capital needs and to settle creditors' claims and blamed Hyflux for delaying its disclosure of "material information".
Hyflux maintained that SMI had agreed to allocate $271 million to settle debts with creditors, but SMI denied this.
Apart from earlier asking Hyflux to remedy threats to Tuaspring and its Magtaa plant in Algeria, SMI also claimed it had been informed of a threat to a third major project only "yesterday".
Hyflux said, it will "continue to relentlessly pursue all other viable strategic opportunities" as part of its court-supervised restructuring.
"Barring a new investor emerging before the court moratorium ends on April 30, we think the likelihood of a liquidation has increased," said OCBC credit research.
Meanwhile, the company's 34,000 retail investors stand to lose most of the $900 million they invested in Hyflux.
Hyflux preference shares investor LH Tay, who invested $100,000 in the instruments, told The Straits Times that he was not surprised by the latest twist.
Mr Tay said: "There are too many regulators involved, which meant higher chances of SMI walking off the deal. It will get even more messy and the claims will be higher, and the chances of Hyflux's survival even slimmer."
Securities Investors Association (Singapore) chief David Gerald said he has reached out to Hyflux founder Olivia Lum and "according to her, the board will quickly re-engage with previous interested parties who had shown keen interest and were bidding for Hyflux with SMI".
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