(Bloomberg) -- Hyflux Ltd., in its third year of a debt-restructuring process, said it’s supporting a plan proposed by Strategic Growth Investments LLC to acquire and privatize it in a transaction that would include a cash injection of S$208 million ($154 million).
The water treatment company will work with SGI to “facilitate the adoption and implementation of this proposal by the various stakeholders on a timely basis,” Lau Wing Tat, a Hyflux director, said in a filing to the Singapore exchange Friday.
In a term sheet that was part of the stock exchange filing, SGI pledged an “augmentation of executive leadership,” and said that it would replace Hyflux’s board of directors entirely. Chief Executive Officer Olivia Lum would become non-executive chair of the advisory board, the U.S. company said.
A deal could help bring to an end the city-state’s most high-profile debt-restructuring case, which started in May 2018. Hyflux’s debt includes bank loans and bonds held by 34,000 retail investors. Despite being approached by multiple suitors, the company has failed to reach an agreement and had sought several extensions on its debt moratorium.
Hyflux is facing claims totaling about S$2.79 billion, some S$1.03 billion of which is from holders of its perpetual capital securities and preference shares, the SGI term sheet showed. Banks are owed S$630.7 million, according to the document.
Under the proposal, SGI would pay S$155 million to certain creditors, set aside S$53 million under Hyflux’s control for “contingent claimants,” and would provide S$60 million for working capital. The deal also includes newly issued equity and convertible securities.
The term sheet is valid for 60 days upon which time a binding letter of intent shall be issued and signed by all related parties. SGI aims to close the deal within 60 days of the execution of the letter of intent, it said.
SGI will terminate the deal should Hyflux go into judicial management, mainly because that would likely result in a prolonged process, Michael Hong, chief investment officer of the U.S. firm, said in a letter to Lum, also filed to the exchange on Friday. Judicial management is a form of debt restructuring in which an independent manager is appointed to supervise the affairs, business and property of a company under financial distress.
Singapore’s High Court on Oct. 15 warned Hyflux about dragging out its restructuring process and said there would be no further adjournments on a hearing to decide whether it should be put under judicial control. The next hearing is Nov. 16.
Utico FZC’s offer for Hyflux is the only one which isn’t averse to a judicial management and plans to keep the company listed, according to a statement from a spokesman of the Middle Eastern suitor. Utico will defend its position in the court hearing if asked to, he said.
Founded by Lum and once heralded for its desalination technology in Singapore -- a country that had long depended on importing water and harvesting rainwater -- Hyflux’s expansion into the power-supply business led to ballooning debt that it couldn’t repay. That left tens of thousands of retail investors in the lurch and prompted a rare public protest in Singapore.
(Updates with comments from Utico in 10th paragraph)
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