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Court grants further extension in moratorium to Hyflux as rescue deal moves forward

Court grants further extension in moratorium to Hyflux as rescue deal moves forward

Source: Business Times
Article Date: 30 Nov 2019
Author: Marissa Lee

Hyflux's application to extend deadline was unopposed despite reports of threats by some lenders to block the restructuring.

THE Hyflux lenders that were reportedly opposed to the rescue deal signed by Hyflux and white knight Utico have so far came up empty on their threat to block the restructuring.

At the end of an hour-long High Court hearing on Friday, Justice Aedit Abdullah granted Hyflux a two-month extension of its debt moratorium, with the next hearing to be held on Jan 29.

This was the same time frame that Hyflux had sought. It plans to file applications for scheme meetings with creditors before the end of January.

No parties opposed the extension of the moratorium, though the question of how a S$40 million pot of money should be distributed among all professional advisers involved in the restructuring was brought up before the court.

Debtwire reported on Wednesday that an unsecured working group (UWG) of banks comprising BNP Paribas, Bangkok Bank, KFW IPEX-Bank, Mizuho Bank and Standard Chartered Bank (Singapore) were opposed to the terms of the Hyflux-Utico deal.

In particular, Hyflux should not have agreed to pay its financial adviser nTan a success fee of up to S$25 million without consulting them first, the group argued. The UWG's financial adviser is Borrelli Walsh.

However, the UWG did not oppose the extension of the moratorium on Friday, nor did it cast a blocking vote against the proposed rescue plan.

"We're prepared to work with the company over the term of the moratorium to see if consensus can be reached on the restructuring agreement," said Tan Kok Quan Partnership lawyer Eddee Ng on behalf of the UWG.

WongPartnership lawyer Manoj Sandrasegara, who represents Hyflux, noted the concerns raised by the UWG. But he told the court that he was "reasonably confident" that the issue would be resolved.

"(We'll) sit down in a room and have a nice cup of coffee and sort this out... It shouldn't be a case of the tail wagging the dog. This shouldn't be a stumbling block," he said.

Hyflux, which has been under bankruptcy protection since May last year, signed a S400 million rescue package with Utico on Tuesday. The Emirati utilities group has agreed to set aside up to S$100 million to pay off Hyflux's perpetual and preference shares worth S$900 million in face value.

But Utico can call off the deal if Hyflux and its team of professional advisers fail to agree on how much everyone should be paid.

In April this year, after rescue talks with an Indonesian consortium led by Anthoni Salim broke down, Hyflux engaged a new financial adviser, nTan, to help salvage the situation.

Hyflux had agreed to pay nTan an upfront S$1 million non-refundable engagement fee, according to documents seen by The Business Times.

Hyflux had also agreed to nTan's monthly retainer fee of S$500,000 per month for the first two months, S$425,000 per month for the third and fourth month; and S$350,000 per month for the remainder of the engagement, the documents showed. These sums are subject to review but invoiced monthly in advance and payable immediately.

Separately, nTan's success fee is computed based on the sum of a few things, including 7.5 per cent of the total value of Hyflux's debt that is waived, written off, extinguished, forgiven or avoided; 1.5 per cent of the total value of Hyflux's debt that is restructured, repaid or refinanced; and 1.5 per cent of any transaction undertaken by the Hyflux group and its associates.

In an affidavit filed on Wednesday, Hyflux chief executive Olivia Lum discounted the objections made by the UWG and Borelli Walsh, noting that the latter has "consistently advocated and pushed for putting Hyflux under judicial management".

Ms Lum wrote: "As stated in my affidavit of Aug 2, 2019, the financial advisor to the UWG even went as far as to request Utico to work with him and for the UWG to put Hyflux under judicial management, and in return, he was prepared if appointed as the judicial manager of Hyflux, to sell the assets of Hyflux to Utico for a significantly smaller sum as opposed to the investment proposed by Utico."

She added: "Utico is unsympathetic with the views of the UWG on professional advisers' fees and has expressed its view that the issue of professional advisors' fees should be resolved between the professional advisors themselves, and should not hold up the execution of the Hyflux-Utico restructuring agreement."

The rescue deal is subject to other conditions precedent, such as regulatory approval from the National Environment Agency in relation to the change of control in the TuasOne project.

Drew & Napier lawyer Mohan Gopalan, who acts for NEA, told the court on Friday that the NEA is supportive of the novation initiative: "Reaching an agreement is the best outcome for the project."

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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