The planned and controversial rescue of Hyflux has been called off, leaving the distressed Singapore-listed firm on the verge of liquidation and 34,000 retail investors on the brink of losing all their money.
Some S$900 million ($665 million) is outstanding on Hyflux's perpetual bonds and preference shares. The water treatment and power company has also admitted S$2.81 billion in outstanding claims from 74 claimants including Mizuho Bank, DBS Bank, BNP Paribas and PwC.
“It is difficult to see how Hyflux can survive without the fund injection from the White Knights," a distressed debt consultant told FinanceAsia. "Stakeholders will be hoping that management will be successful in their search for an alternate source of capital, but the odds don’t look good.”
On Thursday, Hyflux announced that SM Investments – comprising Indonesia's Salim Group and Medco Group – had declined to provide the company with written confirmation that they would complete their proposed investment in the company. Under an agreement to restructure Hyflux’s debt, they were supposed to invest S$530 million for 60% of Hyflux, provided certain conditions were met.
“In the circumstances, the investor has repudiated the restructuring agreement and the company has accepted the investor's repudiation. The restructuring agreement is therefore terminated,” Hyflux said.
“There can be no assurance that the company will be successful in securing a new investor or in finding a viable alternative to the restructuring,” it added.
SM Investments took a different line and said it was “surprised by the action taken by Hyflux.” The would-be white knight said a delay in disclosing key information had prevented it from determining the right allocation between working capital and the settlement amount for creditors.
But that was contested by a Hyflux spokeswoman who told FinanceAsia that SM Investments was provided access to a virtual data room with information and had access to Hyflux management and employee.
David Gerald, the founding president and chief executive officer of the Securities Investment Association (Singapore) (SIAS), urged senior creditors to give Hyflux a chance to provide an alternative proposal and not put the company under liquidation hastily.
In a press statement Gerald also disclosed that he had called Hyflux's executive chairman and group CEO, Olivia Lum, to determine whether there is an alternative solution and was told Hyflux’s board needed more time to work on one.
“I have, on behalf of the retail investors, conveyed to her the dissatisfaction with the last offer for them and had requested to bear that in mind when discussing a new deal,” he added.
Under the restructuring, which has been the subject of protests and legal challenges, holders of Hyflux perpetual bonds and preference shares were due to receive S$27 million and 10.26% of the company for the S$900 million they are owed.
They now risk getting nothing unless an alternative can be found.
At least 40 retail investors have been talking to lawyers about a potential legal action against Hyflux’s board for allegedly failing to disclose material information, something the Hyflux spokeswomen denied.
SIAS on Monday also encouraged creditors to call for an investigation by the authorities or for the new board to investigate the old board, claiming it would not precipitate the company's liquidation.