Hyflux says restructuring deal still on, disputes investor’s reasons for pull-out

Embattled water treatment firm Hyflux has 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 has the intention to proceed with the scheme meetings scheduled next month.

In an update on the Singapore Exchange late on Tuesday night, Hyflux said that while certain disagreements have recently emerged between the company and investor SM Investments, the restructuring agreement entered between both parties on October 18 last year remains in force and the investor has not stated that it will abandon its proposed investment.

Hyflux added that it has tried but has been unable to meaningfully engage with the investor. It will, pursuant to contractual obligations, use reasonable endeavours to ensure the necessary conditions under the restructuring agreement are satisfied in order for the investment to proceed.

The firm reiterated its intention to proceed with the scheme meetings scheduled on April 5 and April 8, as well as the extraordinary general meeting to approve the terms of the investment on April 15.

Disagreements between white knight investor and Hyflux

In the statement on Tuesday, Hyflux noted that disagreements have emerged in recent weeks between Hyflux and SM Investments - the consortium formed from Indonesian conglomerate Salim Group and Medco Group which had offered the S$530 million lifeline to safe the company from its financial troubles.

SM Investments had listed two default notices as ‘prescribed occurrence(s)’, which are situations that ‘cease or threaten to cease for any reason to carry on its business in the usual and ordinary course’ that gave the investor the right to terminate the deal. The first one was on the default notice on Hyflux's Tuaspring from Singapore’s national water agency PUB, while the second was related to the defaults on a desalination plant in Algeria.

Hyflux however ‘strenuously disputed’ the claims from SM Investments, disagreeing with the ‘allegations’ and said that ‘no prescribed occurrence has arisen as of this date’. The firm said in the statement it has refuted the investor in a written reply dated March 25.

As PUB has not terminated the water purchase agreement with Hyflux yet, a default notice does not constitute as a threat on the firm or Tuaspring to cause it to stop its business from its ordinary activities.

Besides, Hyflux added that in the event the water purchase agreement is terminated, the earliest date for a termination would be on May 6, as PUB would have to provide Hyflux a 30-day written notice after the given notice deadline of April 5.

‘Thus, any cessation of Tuaspring’s business in relation to the water purchase agreement, which the company acknowledges would give rise to a prescribed occurrence under the restructuring agreement, can only take place after the long-stop date,’ said Hyflux.

Read more on Singapore’s water agency to take over Hyflux’s Tuaspring plant if defaults not resolved.

‘Belated assertion’ on commercial terms of the schemes

Hyflux also called SM Investments’ disagreement with the use of S$271 million from its proposed investment, as well as S$1 million from Hyflux’s existing funds for restructuring as a ‘belated assertion’.

The water treatment firm said it already had an agreement with the investor on the commercial terms of the overall cash and equity allocation before the February 16 publication of the restructuring proposal.

The scheme presented to the Singapore High Court on February 21 was also based on the same terms.

If SM Investments ‘wrongfully terminates’ the restructuring agreement, Hyflux said it would be able to lay claim to the S$38.9 million deposit which was taken out of Salim-Medco’s proposed investment and placed into escrow shortly after the agreement was executed.

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