White knight? What white knight? Dark days loom ahead for Singapore investment community as Hyflux enters its final chapter of its protracted restructuring process. On 17 April, I wrote that Hyflux is on course for a horror finale. That fateful day, PUB issued a 30-day notice to Tuaspring Pte Ltd (TPL) to terminate the Water Purchase Agreement (WPA) and take over the Tuaspring Desalination Plant (TSDP).
When Hyflux sought bankruptcy protection from the High Court back in February 2018, nobody could have imagined the outcome of today. There were plenty of high hopes as former white knight, SM Investments, had emerged out of nowhere to dangle a $530million rescue mission in late last year. But more than a year later, Hyflux appears to be on course for liquidation following the collapse of the rescue package. It must have been a devastating roller-coaster ride for Hyflux investors.
Hyflux going down in flames?
Evidently, PUB only intended to take over only the desalination plant of Tuaspring. On the other hand, the latest development triggered its largest creditor, Maybank, to terminate the Collaboration Agreement and take over the power plant. Although the latest move meant that Hyflux had finally disposed the ill-fated Tuaspring Integrated Plant, investors must not rejoice yet. This is because without Tuaspring, a big question mark would center around Hyflux’s ability to settle its mountain of debts. Without a major asset sale like Tuaspring, it remains to be seen how Hyflux could avoid an explosive liquidation. As of 30 September 2018, the loan and borrowings amounted to a whopping $1.56billion.
To add to the shambolic mess, Hyflux is slugging it out with former white knight, SM investments, in the courtroom over the latter’s repudiation of the restructuring agreement and to claim the $38.9million deposit. In turn SM investments sued Hyflux for unilaterally cancelling the agreement.
Amidst the chaotic drama, investors of Hyflux must be left ruing what is in store for them. After all, they are perceived to be the biggest victims out of this big fiasco. To be sure, any legal windfalls or money recovered from the remaining asset sales would have to go to the major creditors first, and not the shareholders nor perpetual holders. Minister for the Environment and Water Resources Masagos Zulkifli already reiterated this point during the recent Parliament sitting. Thus, investors should not harbour any false hopes.
Investors must learn from setback
As outrageous it may sound, investors must [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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