(Apr 4): One of Singapore’s highest-profile corporate debt restructurings was thrown into disarray on Thursday, as embattled water and power company Hyflux scrapped a pact with its would-be saviour.

The rupture follows disputes in recent weeks with SM Investments, the consortium of Indonesian businessmen that agreed last year to rescue Hyflux in return for a majority stake. It adds further uncertainty to the fate of the once-vaunted company, whose Tuaspring desalination and power plant was heralded as one of the “national taps” for an island that had long depended on importing water and harvesting rainwater for survival.

The development prolongs the plight of about 34,000 retail investors who stand to lose almost everything, after being lured by the promise of a 6% annual return forever from a company that seemed to have a gold seal of government approval. About 400 to 500 of those individual investors attended a rare public protest over the course of the event in Singapore last weekend.

The company said in a filing Thursday that it has no confidence that SM Investments is prepared to complete a $530 million cash infusion plan that forms the core of its survival plan. Hyflux scrapped a vote by creditors on the restructuring that had been planned for April 5. SM Investments is taking legal advice following the Hyflux decision, saying it has abided by the agreement at all times, according to a media statement.

Hyflux needs “to either urgently find another suitor, or reach some form of solution with creditors,” said Ang Chung Yuh, a fixed income analyst at iFast Corp in Singapore. “Both are going to be challenging, but the latter is probably impossible.”

Hyflux, which is saddled with $2.8 billion of unsecured claims and default notices, had called for senior creditors to take a 75% haircut, while retail investors faced losses of about 90%.

The company had given SM Investments a deadline of 12 pm Singapore time Thursday to respond on whether it would go ahead with the investment but didn’t get a clear answer, people familiar with the matter said. Hyflux announced it was terminating the restructuring plan with SM Investments in the exchange filing after that.

“Barring a new investor emerging before the court moratorium ends on April 30, we think the likelihood of a liquidation has increased,” according to Oversea-Chinese Banking Corp credit research.

Hyflux sought court protection from creditors in May 2018 and has since obtained an extension through April 30 to reorganise its debt.

Spats Deepen
Hyflux sought “a final clear and unequivocal written confirmation” from the investor on the proposal that would have enabled voters to make an informed decision, it said. The investor has declined to provide the company with such written confirmation, and thus repudiated the restructuring agreement, it added.

“The restructuring agreement is therefore terminated and the company intends to take all necessary action in connection with such termination,” Hyflux said. Both parties could be mired in a long legal fight ahead.

SM Investments contended that Hyflux has failed to remedy default notices involving two water-treatment projects, and was also informed of a threat to another undisclosed project.

Hyflux plans to demand access to a $38.9 million deposit paid by SM Investments, after the collapse of the deal, according to a person familiar with the matter.

What’s Ahead
Hyflux now intends to work closely with the key creditor groups and relevant stakeholders to find mutually acceptable bases to pursue alternative opportunities, it said, making references to the Singapore’s government intention to take over the desalination plant.

Singapore’s Public Utilities Board has said it’s willing to pay $0 to take over the unprofitable Tuaspring desalination plant and forgo any compensation if the agency chooses to end Hyflux’s water-supply concession. Such a development could enable Hyflux to reach out to a wider pool of investors, it said.

The government has rejected calls to bail out Hyflux, saying the restructuring process is a “commercial matter.”