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Lessons learnt from Hyflux's troubled waters, web of creditors; restructuring faces hurdles

Goola Warden
Goola Warden2/25/2019 07:30 AM GMT+08  • 8 min read
Lessons learnt from Hyflux's troubled waters, web of creditors; restructuring faces hurdles
SINGAPORE (Feb 25): For much of the time since it was listed in 2001, water treatment company Hyflux was the poster child of entrepreneurship. In May 2018, however, the company announced it was seeking a court-supervised process to reorganise its debt and
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SINGAPORE (Feb 25): For much of the time since it was listed in 2001, water treatment company Hyflux was the poster child of entrepreneurship. In May 2018, however, the company announced it was seeking a court-supervised process to reorganise its debt and businesses. On Feb 16, it held a hastily arranged media briefing to explain the processes for restructuring, such as the scheme of arrangement for unsecured creditors, preference share and perpetual security holders, and a subsequent extraordinary general meeting (EGM) for equity holders.

To sum up, the holders of Hyflux’s $400 million worth of preference shares and $500 million worth of perpetual securities (PnP) will receive the second worst deal in the restructuring (the worst is for its shareholders). For every $1,000, PnP investors will receive just $30.15 in cash and $76.39 in Hyflux shares, or 10.7 cents for every $1 invested, if the scheme of arrangement meets all its conditions. On the other hand, the complexity of the voting process with different classes of creditors does not ensure a successful restructuring. The alternative is liquidation, where secured creditors such as Malayan Banking and the Public Utilities Board (PUB) can exercise their rights.

Hyflux’s troubles stem from its Tuaspring project, which it clinched in 2011. At the time, the company said the planned $890 million desalination plant could produce 318,500 cu m per day. Included in the desalination plant called Tuaspring — eventually Tuaspring Integrated Water and Power Plant — is an onsite 411MW combined cycle gas turbine power plant. Tuaspring has a water purchase agreement with PUB to supply water for a concession period of 25 years, starting from 2013. The first-year price for the desalinated water is 45 cents per cu m.

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