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S$50m adviser fee pot linked to scheme timing, Hyflux asset value: Utico

S$50m adviser fee pot linked to scheme timing, Hyflux asset value: Utico

Source: Business Times
Article Date: 09 Mar 2020
Author: Sharon See

Hyflux's potential white knight Utico issued a clarification on Sunday saying its Jan 28 letter was clear about its intention to pay S$40 million with respect to the restructuring agreement (RA) and increase it to S$50 million to "save time and hence money by passing the scheme early".

Hyflux's potential white knight Utico issued a clarification on Sunday saying its Jan 28 letter was clear about its intention to pay S$40 million with respect to the restructuring agreement (RA) and increase it to S$50 million to "save time and hence money by passing the scheme early".

"Having said that, with loss of time, its ability to pay for the deal with value leakage at Hyflux would anyway reduce the pot to S$30 million," the Middle Eastern utility provider said in a statement.

Utico is offering a S$400 million rescue package to the beleaguered water treatment company. It said it does not support Hyflux's proposal to pay its new advisers at the cost of previous advisers or even of the Securities Investors Association's (Sias) advisers, adding that "this will be grossly unjust and manipulation of the situation without recognising Utico's true intent".

It said most Hyflux assets stakeholders like offtakers, lenders and minority shareholders have approached Utico to fix the situation to preserve value.

In its Jan 28 letter to Hyflux, Utico said it will raise the pot for adviser fees to S$50 million if it receives the support from all advisers for the Hyflux scheme and RA at a court hearing set to take place on Jan 29.

The pot would however decline from S$40 million to S$30 million if the advisers fail to support the scheme at the hearing, it said, adding that Utico's own adviser fees are separate and do not come from the S$50 million pot.

In its latest letter, Utico said that without action in the coming weeks, there could be further deterioration of value and also real loss of the assets. This includes assets in Oman and Algeria where "severe losses have made the value of Hyflux shares effectively zero", it added.

"Without additional investments and timely action these assets, currently zero, will result in even further direct liabilities on Hyflux and create creditors heretofore unknown," the company said.

"Further, the daily penalties on assets makes the recovery for any creditor unlikely based on these assets alone, and Utico too was now wondering that if the scheme will take more time, then these assets as of now under the control of offtakers, lenders and minority shareholders will mean more legal battles for years and incur further costs in tens of millions."

Utico noted that Hyflux's Qurrayat project has a negative return for shareholders, with penalties being incurred every day.

The firm questioned why the scheme was being deferred for so long when there was no action for value to be maintained, or creditors seeking to know what actions are being taken for the same.

"It is also very confusing why investors who have no knowledge of Hyflux and its assets and have not met these stakeholders, would consider paying hundreds of millions to creditors," Utico said.

"Utico doubted the intent behind the letters for investment sent to Hyflux for announcement and whether it was a pure ploy only to delay the scheme itself and lower recovery eventually through value leakages," it said.

It said it has provided sufficient financial information to the creditors, including financing from its parent group IDB and Utico's own liquidity, which provides financing of over S$440 million.

The firm added: "This information will also be provided to PnP (perpetual securities and preference shares) who chose Option 2, where they have deferred payments."

It also stated that Utico was prepared to offer 3 to 4 per cent of Hyflux in addition to the option 2 to PnP if they approve the deal.

"Hyflux and Sias failed to call for this vote asked by Utico during the first week of March which would have enabled this aspect."

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

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