Hyflux calls off SM Investments rescue deal, cancels proposed scheme meetings

In a hurricane twist of events, the US$530 million rescue deal from SM Investments to save embattled water treatment firm Hyflux is now off the table.

Hyflux announced the cancellation of the scheduled scheme meetings on April 5 and 8 in a regulatory filing on Thursday noon, just days before the proposed meetings were supposed to happen. The rescue deal from SM Investments is a critical factor to the firm's current restructuring agreement.

Due to the cancellation of the scheme meetings, shareholders also need not attend the extraordinary general meeting scheduled after the scheme meetings on April 15, the firm said in the statement.

The announcement comes just weeks before the firm loses court protection from its creditors.

Prior to the announcement from Hyflux, SM Investments had said last Thursday 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.

The Indonesian investor group had already said in its statement last week the ‘allocation set out in the schemes of arrangement proposed by Hyflux is not agreed. Therefore, the schemes do not satisfy the conditions of the restructuring agreement.’

But the white knight investor SM Investments responded to The Business Times today saying it was ‘surprised’ by Hyflux’s ‘purported termination’ of the rescue deal, and that it will be taking legal advice with respect to the situation.

No confidence in investor, says Hyflux

In the filing on Thursday, Hyflux said it had attempted on multiple occasions to meaningfully engage and had made further attempts to seek clarity with the investor on its assertions and views on the restructuring agreement.

However, in light of the investor's responses and conduct, the company ‘has no confidence that the investor is prepared to continue to complete the proposed SMI Investment, even if all outstanding conditions precedent under the restructuring are fulfilled’, said Hyflux in the statement.

The “outstanding conditions” refer to the sanction of the schemes and the obtaining of approvals at the extraordinary general meeting and from the National Environment Agency.

Ahead of the scheduled scheme meetings, Hyflux explained it had seeked a ‘clear and unequivocal’ written confirmation from SM Investments that promises that the investor will proceed to complete the investment if the outstanding conditions are met.

‘Regrettably, the investor has declined to provide the company with such written confirmation,’ Hyflux said.

According to Hyflux, in the circumstances shown, the investor has rejected the restructuring agreement and Hyflux has therefore accepted the repudiation.

‘The restructuring agreement is therefore terminated and the company intends to take all necessary action in connection with such termination,’ Hyflux continued.

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

Hyflux will ‘relentlessly pursue’ all other options

The company went on to ‘reassure its investors and stakeholders’, stating that it would ‘continue to relentlessly pursue all other viable strategic opportunities as part of the court-supervised reorganisation process’.

The company said it intends to work closely with the key creditor groups and relevant stakeholders to find mutually acceptable bases to enable it to pursue alternatives.

The firm highlighted the clarification from Singapore’s water agency PUB on its intention to purchase the loss-making Tuaspring Desalination Plant without seeking compensation from Hyflux’s Tuaspring if PUB terminates the Water Purchase Agreement.

The PUB had on March 6 gave Hyflux’s Tuaspring a 30-day deadline to remedy any defaults from the agreement between the firm and the government.

We ‘believe that such development could potentially enable the company to reach out to a wider pool of investors which may not otherwise have been interested in an investment in the group had this asset (Tuaspring) remained within the group’, said Hyflux, adding that any interested investor would first have to seek PUB's approval for a change in control to clinch the deal.

However, Hyflux added to say that ‘there can be no assurance’ that the company will be successful in securing a new investor or in finding a viable alternative to execute the restructuring.

Hyflux’s shares remain suspended on the Singapore Exchange.