SINGAPORE (Apr 4): Water treatment company Hyflux said on Thursday that a lifeline deal with its prospective Indonesian investor had been terminated, throwing the beleaguered Singaporean firm's debt restructuring plans into doubt.

Hyflux said in a statement that a deal with SM Investments, a consortium of Indonesia's Salim Group and Medco Group, had been called off after it failed to confirm its investment ahead of crunch talks with creditors.

But, in a separate statement, SM Investments said it was "surprised" by Hyflux's action.

In October 2018, SM Investments had agreed to acquire 60% of Hyflux for $400 million and give it a loan of $130 million.  

Hyflux said it would continue to "relentlessly" pursue all other viable strategic opportunities as part of its court-supervised reorganisation process.

On Thursday, it also cancelled meetings scheduled for April 5 and 8 with creditors who were due to vote on its restructuring proposals.  

Tensions between Hyflux and SM Investments have flared over the last few weeks for reasons including a disagreement over the proposed allocation of money to repay creditors.

SM Investments had previously also warned Hyflux that it could walk away from the deal if the company does not fix defaults that could allow its Tuaspring desalination plant to be taken over by Singapore's public water agency.

”The probability of a liquidation is significantly heightened if the investor pulls out," Ezien Hoo, a credit analyst at OCBC Bank, had said earlier this week.

Hyflux started a process to restructure its debt last year, which stood at about S$1.67 billion at the end of September.

Hyflux's Tuaspring plant is the largest of three desalination plants in Singapore and an important water source for the city-state. PUB, Singapore's water agency, has warned
Hyflux that it may take over the plant if the company does not fix its contractual defaults by April 30, 2019.

Hyflux said on Thursday said it could potentially be able to access a wider pool of investors without the Tuaspring desalination plant, which needs PUB's approval for any change in control.

However, it added 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."