SINGAPORE, May 22 — Hyflux Ltd, the Singapore water treatment firm, is considering seeking a form of court protection to facilitate negotiations with creditors, people with knowledge of the matter said.
The company is considering asking the Singapore courts for a 30-day moratorium preventing creditors from taking certain actions that could hurt its financial position, according to one of the people. The move would give Hyflux space to work out an arrangement with the creditors, the person said, asking not to be identified because the information is private. It may file an application as soon as today, May 22, the person said.
Hyflux has been working with an adviser to explore options for managing its debt load, the people said. The turnabout in fortunes for the company, whose founder Olivia Lum was a poster child for local entrepreneurs, adds to signs of pressures that smaller borrowers in the Singapore debt market face.
“A debt workout of some sort was inevitable,” Ezien Hoo, a Singapore-based credit analyst at Oversea-Chinese Banking Corp, said by phone today. “They were facing short-term debt, as well as the need to maintain cash to meet their bond covenants.”
Fund injection
Hyflux last year posted its first annual loss since listing, and the company has said its energy business could suffer as an oversupply of gas depresses electricity prices. It’s been in talks to sell a stake in its single largest asset, the Tuaspring project, which combines Southeast Asia’s largest desalination plant with a gas turbine power plant. Hyflux has also been negotiating a potential divestment of the Tianjin Dagang desalination plant.
The fact that Hyflux was able to win contracts in recent months could mean that its business, excluding Tuaspring, is not so dire and that the firm may just need time to recapitalize its balance sheet, according to OCBC’s Hoo.
An investor-relations official at Hyflux declined to comment by phone. Hyflux securities were halted from trading in the city-state yesterday, pending the release of an announcement. The situation is fluid, and Hyflux could decide to pursue other options, the people said.
Hyflux, which was worth nearly S$2.1 billion (RM6.2 billion) at its peak in late 2010, now has a market value of S$165 million. It’s the second-worst performer on Singapore’s FTSE ST All Share Index this year, with a 39 per cent decline, trailing only Noble Group Ltd.
Payment deadline
The company said earlier this month it’s in talks with potential investors to inject funds. Its net loss widened to S$22.2 million in the three months ended March 31, from a restated S$64,000 a year earlier.
Hyflux’s net debt surged to 165 times earnings before interest, taxes, depreciation and amortisation as of March 31, from about 32 times at the end of last year, according to data compiled by Bloomberg. The company faces a coupon payment due May 28 on its S$500 million of 6 per cent perpetual securities. Its S$100 million of 4.25 per cent bonds mature in September.
“If the company does end up filing for court protection now, things certainly went downhill even faster than I projected,” said Ang Chung Yuh, senior fixed-income analyst at iFast Corp in Singapore.
Law change
Hyflux’s former success had won accolades for its founder, an orphan who left a career in pharmaceuticals to start her own business with S$20,000 raised from selling her car and apartment.
The company, which became Hyflux, won municipal contracts in Singapore and expanded into new markets like Malaysia, China and India. Lum was named to government bodies, including International Enterprise Singapore, and appointed as a member of parliament in a seat reserved for distinguished community members.
Singapore updated its corporate insolvency framework last year following nearly US$1 billion (RM3.9 billion) of defaults in the Singapore bond market since November 2015, Law Minister K. Shanmugam said in an August speech. The changes, which incorporate elements of the US Chapter 11 system, were passed by parliament in March 2017.
One of the amendments effectively protects companies seeking an arrangement with their lenders, allowing a court to block creditors from filing winding-up petitions or seizing pledged assets while negotiations take place. — Bloomberg
