SINGAPORE (Apr 15): Hyflux is suing former white knight investor SM Investments (SMI) in the Singapore courts for repudiation of the restructuring agreement agreed upon between the two parties in Oct last year.
The water and power company on the brink of bankruptcy is also claiming the $38.9 million deposit placed into escrow shortly after the execution of the restructuring agreement.
Hyflux also announced it had appointed nTan Corporate Advisory as an additional advisor in the company’s ongoing court supervised reorganisation process.
Under the terms of an Oct 2018 rescue agreement, SMI -- a group of Indonesian investors led by Anthoni Salim -- would inject $400 million into Hyflux in exchange for a 60% stake. They will also loan the company an additional $130 million.
However, the relationship between the two parties soured after differences between surfaced. New issues were raised, including matters previously undisclosed by Hyflux in connection with the Tuaspring plant, its key operating asset.
On April 4, Hyflux issued a statement announcing SMI had declined to provide the company with such written confirmation that it will proceed to complete the rescue agreement, adding that it had decided to terminate the agreement as SMI had repudiated the agreement.
Within an hour, SMI shot back, saying the it was surprised by the termination by Hyflux of the restructuring agreement and that it will be taking legal advice in relation to the latter's action.
In 2011, Hyflux won the contract to build the Tuaspring combined desalination and power plant. To fund the project, Hyflux raised more than $1.4 billion in bank loans, perpetual bonds and an issue of preferred shares.
The Tuaspring project was conceived with the idea that the plant would earn revenue by selling excess power to the nation’s electricity grid. But with the liberalisation of Singapore's retail electricity market, power prices fell and the plant began to lose money.
With the collapse of the deal, Hyflux is currently working with key creditors and stakeholders to find a way to pursue alternatives of saving the company. But with the court protection deadline looming, analysts say the likelihood of liquidation has increased.
“MAS, ACRA and SGX RegCo are currently reviewing Hyflux-related disclosure issues, as well as compliance with accounting and auditing standards, to determine if there have been breaches of listing rules and/or the relevant laws and regulations,” say MAS, ACRA and SGX RegCo spokespersons in a joint response to media queries.