Hyflux sues SM Investments over aborted bailout

Water treatment firm Hyflux has filed a lawsuit against Indonesia’s SM Investments in the Singapore High Court, saying that the investor has repudiated on the rescue deal. The lawsuit was also filed to claim the S$38.9 million deposit.

The lawsuit follows after Hyflux called off the rescue deal from SM Investments earlier this month on claims that the investor has repudiated the restructuring agreement. Due to the removal of the rescue deal, then scheduled scheme meetings for investors, creditors, and stakeholders were also cancelled.

In a filing on the Singapore Exchange on Monday after trading hours, the firm announced that SM Investments has denied that it has repudiated the restructuring agreement and Hyflux has filed a writ of summons in the Singapore High Court.

The lawsuit is made ‘to commence an action against the investor for repudiation of the restructuring agreement and to claim the S$38.9 million deposit placed into escrow shortly after the execution of the restructuring agreement’.

‘The company will update further as and when there are any further material developments concerning this matter,’ Hyflux said.

Rescue deal fall-out: Time line of events

Last May, debt-ridden Hyflux had seeked for court protection to reorganize its debts. By October last year, Hyflux said it found white knight SM Investments, who said it would invest S$530 million in the firm in exchange for a 60% stake.

In March this year, Hyflux’s wholly-owned Tuaspring received a default notice from Singapore’s national water agency PUB for failing to keep its desalination plant in a a ‘reliably operational’ mode as required under the Water Purchase Agreement. PUB warned that it would take control of Tuaspring if defaults were not resolved in about a month’s time.

Hyflux then received a notice from SM Investments days later on concerns to the default notice from PUB, saying that the restructuring agreement between them entitles the investor to terminate the restructuring agreement if a ‘prescribed occurrence’ occurs and is not remedied within two weeks or as mutually agreed.

Later in March, Hyflux disputed the reasoning from its white knight investor to excuse itself from the proposed S$530 million investment which is expected to save the company from its problems. Noting several disagreements between its investor and itself, Hyflux continued to stress that it had the intention to proceed with the scheme meetings scheduled next month.

Days after that statement from Hyflux, SM Investments said it did not endorse on the current rescue deal that Hyflux plans to put to a creditors’ vote in the upcoming scheme meeting on April 5.

Eventually in April, Hyflux announced that the rescue deal was off the table a day before the April 5 scheme meeting, and said it would ‘take all necessary action’ in connection with such a termination.

Hyflux’s court protection from creditors expires on April 30

The firm will lose court protection from its creditors come April 30, and it has not announced on any crucial rescue deal that will help it work through its debt restructuring.

The representative for Hyflux, WongPartnership lawyer Manoj Sandrasegara told a case management conference on Thursday: 'I have no instruction at this stage to apply to extend the moratorium,' Business Times reported.

It is likely for Hyflux to return to investors who made rescue offers last year to see if any of those parties would be keen on a deal.

Last year, the water treatment firm had conducted a competitive bidding process and entered non-disclosure agreements with 16 potential investors. The investors included Chinese companies and Southeast Asian regional businesses.

Read more on Hyflux takes S$916 million impairment hit for first nine months of 2018.