Hyflux’s S$400m rescue deal will give a UAE firm 95% stake in it – here’s what we know

Utico does not intend to conduct a merger or take-over, and Hyflux will remain listed.
The Straits Times

Days before its debt moratorium was due to expire on December 2, embattled water treatment firm Hyflux has finalised an agreement with a second rescue investor.

The development comes just seven months after Indonesia’s Salim Group called off an earlier deal.

UAE-based Utico inked a restructuring agreement with the insolvent Singapore firm for S$400 million on Tuesday (Nov 26) to save it from its S$2.7 billion debts.

Read also: Singapore seizes water plant from Hyflux after launching accounts probe

Under the deal – which requires approval from creditors, shareholders and government bodies including the Securities Industry Council and National Environment Agency – Utico will pay S$300 million in new shares for a 95 per cent stake in Hyflux.

These shares will be bought by Utico through a special-purpose vehicle that includes its chairman Rashid Al Baloushi, chief executive Ivan Richard Menezes, and other co-investors identified by the company, the agreement said.

The company does not intend to conduct a merger or take-over, and Hyflux will remain listed.

The Emirati firm also plans to reduce its stake in Hyflux to 88 per cent by allocating 7 per cent of shares to institutional and private investors. This is so Hyflux can meet the minimum free-float requirement and resume trading in the first quarter of 2020, the Business Times (BT) reported.

The S$300 million injection will be paid to Hyflux in stages, starting with a S$10 million bank deposit five days after the court allows the company to hold a shareholders’ meeting to approve the new schemes of arrangement.

Once the deal is completed, Utico will give Hyflux S$140 million in cash, and S$150 million in promissory notes or preference shares in a Utico affiliate, the agreement said.

In addition, Utico will also grant the firm a working capital line of up to S$100 million.

S$250 million to pay debts, S$50 million for securities holders: Hyflux

Hyflux plans to spend S$250 million of the potential capital injection on settling its debts, which include unsecured bank debt, contingent debt, and trade debt, it said.

It will also set aside S$50 million to pay its roughly 34,000 retail holders of Hyflux preference shares and perpetual securities.

In total, the company owes 34,000 retail holders of Hyflux preference shares and perpetual securities (PnP) S$900 million in principal value, BT reported.

Under the proposed deal, Hyflux debt securities holders will get two options. The first: receive either S$1,500 in cash, or half of the total value of their debt securities, whichever is less.

The second: receive half of the total value of their debt securities, paid in five installments over two years, and earn 1.25 per cent annual interest on the amounts.

Those who pick option two will also get a share in a S$50 million pool Utico plans to divide among them two years after the deal.

If Utico undergoes an IPO within these two years, then the pool becomes the cash equivalent of a 4 per cent stake in Utico at the listing price, or S$50 million, whichever is higher, BT reported.

After paying off the aforementioned debts, Hyflux plans to use the remaining capital to pay its professional advisers’ fees and fund business growth or meet working capital needs, it said.

Read also: