Will Hyflux's creditors get restructuring deal?
At issue now is whether the long-suffering creditors of Hyflux will finally get a restructuring deal with terms they are prepared to accept.
Following a more than two-year-long failed restructuring attempt that has seen a number of surprising twists, troubled water treatment firm Hyflux and its unit Hydrochem ended the year under judicial management and its founder Olivia Lum losing control of the companies.
At issue now is whether the long-suffering creditors of Hyflux, including some 34,000 retail investors holding its perpetual securities and preference shares (PnP), will finally get a restructuring deal with terms they are prepared to accept.
Or will the company be liquidated if no viable deal is struck? This will mean that the retail investors, who are owed about $900 million, will end up with nothing.
Judicial management is Hyflux's last chance to turn around before liquidation.
Since its appointment by the High Court last month, restructuring firm Borrelli Walsh has lost little time undertaking a review of the financial and operational affairs of Hyflux, Hydrochem and their units.
This includes protecting the companies' books and records, securing their cash and ensuring the continuation of their projects' operations.
Borrelli Walsh has been advising an unsecured working group (UWG) of 19 banks that hold more than $931 million of Hyflux debt, and which had petitioned for the company to be placed under judicial management.
In their latest update, the judicial managers said they are in talks with 14 new potential investors, contacted five investors that had previously expressed an interest in Hyflux and Hydrochem, and aim to identify a suitable investor by the end of next month.
But the judicial managers said they are unable to disclose the identities of these investors at this early stage.
Many creditors, particularly the PnP retail investors, are also keenly watching what Borrelli Walsh's investigation into the Hyflux board and advisers will flush out.
This after Ms Lum and the rest of the board were relieved of their authority - a move some observers say is long overdue, especially with Hyflux and its current and former directors now under probe for suspected false and misleading statements and breaches of disclosure rules.
Despite being given 12 extensions of the debt moratorium over 21/2 years, the Hyflux board was no closer to getting a deal that puts money on the table, and some creditors feared the group's remaining value was being dissipated.
As the probe intensifies, questions are being raised over whether the restructuring had been conducted properly and if the Hyflux board dealt with so-called white-knight investors Aqua Munda and Pison Investments, the investment vehicle of Indonesian magnate Johnny Widjaja, on an "arm's length basis".
Lawyer Eddee Ng, who represents the UWG, asked at a High Court hearing for a judicial management order last month why Pison's and Aqua Munda's offers were contingent on no judicial management being in place and why the Hyflux board should remain when it is being investigated by the authorities.
Observers also pointed out that the "terms of the bidders' invitation memorandums are almost identical, with both involving a reverse Dutch auction, which is geared towards minimising returns to creditors by requiring them to bid each other down. This is in contrast to the primary objective - the maximisation of creditor recoveries".
Recovery rates offered by white knights supported by the board have been paltry - the latest from American fund manager Strategic Growth Investments represents a recovery of just four cents on the dollar for retail investors.
Hopefully, the judicial manager can work a miracle for the 34,000 mom-and-pop investors who deserve better than to see their hard-earned savings go up in smoke.
Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.