SINGAPORE -- The fate of ailing Singaporean water company Hyflux will be determined by creditors on April 5, with a vote on a painful debt restructuring plan.
The proposal would reduce the company's roughly 3 billion Singapore dollars ($2.2 billion) in debt, with some creditors losing up to 89% of the money they provided. If they reject the plan, however, it would preclude a SG$530 million rescue offer from a consortium led by Indonesian conglomerate Salim Group.
This would put Hyflux in danger of liquidation -- an outcome management insists would be far worse for stakeholders.
Hyflux called the vote over the weekend, after receiving court approval to do so. There will be separate meetings for different classes of creditors, which include banks and trade creditors as well as thousands of retail investors -- many of them Singaporeans who invested their retirement savings.
For Hyflux to proceed with the restructuring, it needs to clear specific vote thresholds for each creditor class: more than 50% in number, and 75% in terms of value.
Founded in 1989 by CEO Olivia Lum, Hyflux's water treatment and desalination technologies are considered crucial for resource-poor Singapore's goal of achieving water self-sufficiency. The company has also expanded outside the city-state, including the Middle East.
It relied heavily on borrowing for growth, however, and the failure of a foray into power generation in 2016 hurt its finances. Last May, Hyflux applied for court protection to begin a debt and business restructuring.
In October, Salim Group's consortium proposed the rescue, under which the Indonesian mining and food giant would take 60% of Hyflux shares. The debt restructuring is a prerequisite for the bailout, and the deadline for the rescue has been set on April 16.
If the creditors reject the plan, Hyflux will have to race to find an alternative sponsor before the end of a debt moratorium granted by the court, which falls on April 30.
"Without support for [the Indonesian consortium's] rescue plan, the alternative for Hyflux would likely be liquidation," Lum told stakeholders at a town hall meeting in January. "As some of our assets are located in challenging jurisdictions overseas, liquidation will result in a much less favorable outcome for all stakeholders."
Under the restructuring plan, Hyflux would pay off its debt with cash and shares. Some creditors would lose the majority of their principals but would stand to gain in the future if the company's share price increases.
"The share price will rise should we grow under new shareholders," a source in the company said.
Lum, the largest shareholder with a roughly 30% interest, intends to give up all her holdings.
Trading of Hyflux shares on the Singapore Exchange has been suspended since last May. As of the last trading day, the company's market capitalization was SG$181 million. One share was worth SG$0.21, less than a tenth of the peak in 2005.