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Business deals

Hyflux suitor prods board as rescue deal hangs in the balance

Troubled Singapore water company yet to endorse Utico's $290m proposal

There is a chance that Utico could walk away if Hyflux continues to drag its feet.

SINGAPORE -- United Arab Emirates-based utility provider Utico has urged the Hyflux board to resolve internal differences over a proposed $290 million deal to save the debt-ridden Singaporean water company.

In a statement released Thursday, Utico said the Hyflux board's refusal to endorse Utico's proposed restructure agreement (RA) of the company was probably related to Utico's decision to cap advisers fees at 25 million Singapore dollars ($18 million).

"Utico wishes to state that we already have creditors' approval for the RA, which we consider a very significant development paving the way for a rescue deal for Hyflux," the Utico statement said.

"Apart from whittling down Hyflux value steeply, a delay in resolution will also be detrimental to the" perpetual securities and preference shareholders (PNP) "who would stand to lose all their investments if Hyflux's indecision leads to ultimate liquidation," the statement said.

After Utico announced on Tuesday that it had reached a deal to acquire 88% of Hyflux, with founder Olivia Lum to remain as chief executive, Hyflux released its own statement late on Wednesday saying that no definitive restructuring deal with Utico had been agreed.

"Utico hopes that Hyflux board enters into a Definitive Agreement without losing time by resolving their internal issues," Utico said in its statement on Thursday.

Earlier, a Utico spokesperson told the Nikkei Asian Review that including PNP share payouts, its proposed Hyflux offer was worth more than SG$535 million.

The spokesperson said PNP shareholders would get "SG$50 million minimum to SG$150 million plus on the high side depending on the options they chose."

The spokesperson added that senior creditors stood to receive SG$250 million, while advisers would get SG$25 million, while Hyflux would get SG$100 million for business growth and working capital. Around 34,000 retail investors are owed SG$900 million that they have collectively locked up in PNP.

"Hyflux is coming across a bit like a runaway bride, and not for the first time," said Mak Yuen Teen, associate professor the National University of Singapore Business School, adding that there was a chance Utico could walk away if Hyflux continues to drag its feet.

"If this deal falls through again, other potential suitors may be much less willing to get involved," he said. "The Court may also lose patience. Other stakeholders may also lose patience."

Mak said both sides may have a "communication problem."

"Perhaps Utico, with its own stakeholders, feels it needs to be timely in disclosing information to stakeholders but they don't seem to be on the same page with Hyflux," he said.

Earlier this month, Singapore's High Court granted Hyflux the latest in a series of extensions on its SG$2.8 billion ($2 billion) debt moratorium to Sept. 30. Hylux must agree by then with existing retail and institutional investors on a new debt restructuring plan.

Last October, Hyflux reached another rescue deal with a consortium led by Indonesian conglomerate Salim Group, but the arrangement collapsed in April. Hyflux then started negotiations with other potential alternative sponsors, including Utico.

Founded in 1989, Hyflux's water treatment and desalination technologies are considered essential if Singapore is to achieve water self-sufficiency. The company has also expanded outside the city-state, including in the Middle East. But it has relied heavily on borrowing and made big losses after a foray into power generation in 2016.

According to a Hyflux statement of comprehensive income filed earlier this month, the company's loss for June was SG$7.7 million, having widened from a SG$1.5 million loss for May.

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