End of the road for Hyflux as High Court okays winding up of water treatment firm

SINGAPORE – Beleaguered water treatment firm Hyflux has finally reached the end of the road after the High Court approved its winding up on Wednesday afternoon (July 21).

The move followed a three-year-long restructuring attempt that involved a number of surprising twists.

The ruling also means the long-suffering creditors of Hyflux, including around 34,000 retail investors holding its perpetual and preference (PnP) shares and who were owed $900 million, will likely end up with nothing.

This comes after former white knight Utico failed to meet minimum commitments to present a viable restructuring proposal before the hearing on the winding-up application that was filed last month by Hyflux’s judicial managers.

The managers made the application after restructuring negotiations with several potential investors collapsed.

Hyflux’s winding-up hearing was initially set for July 12 but was adjourned after Utico pleaded to be heard on its application to intervene.

The Securities Investors Association (Singapore), or Sias, was supportive of Utico’s attempt but put down a marker on July 15.

It told the Middle Eastern utility that it “required concrete milestones” and a “credible” restructuring proposal from Utico for Sias to “canvass support” from the retail PnP holders to extend Hyflux’s judicial management order.

But Utico failed to meet minimum commitments, including providing a non-refundable deposit of $10 million in Utico’s lawyer’s account or an escrow account in Singapore by 10am on Wednesday.

With Hyflux expected to run out of working capital by the end of July and no viable restructuring offer on the table, its winding up was inevitable, sources close to the matter said.

Sias president and chief executive David Gerald said: “I am saddened by the result, but the court was very patient and accommodating. I feel really sorry for the PnPs who may now end up getting nothing.

“They put their trust in (founder) Olivia Lum and the board entirely. These are small investors and they have lost their investments. Those responsible for bringing down Hyflux will have to live with their conscience.”

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Mr Patrick Bance of judicial managers Borrelli Walsh declined to comment on Wednesday when asked about the status of its investigations into the Hyflux board.

Law firm Gibson Dunn partner Robson Lee said: “The unfortunate bond holders and note holders are not likely to receive anything from the winding up. But the writing has been on the wall for some time and I believe these investors have come to accept such an ending.

“Any further delay in winding up is likely to prejudice the sale of various assets of the company which the judicial managers have negotiated with credible parties for some time. Meanwhile, whatever remaining balance cash would be depleted. This would be fatal and final.”

Borrelli Walsh’s winding-up application said that there are six bids involving individual assets, according to Bloomberg. There is no specific timeline to sell these assets, but the judicial managers aim to do so as soon as possible, it added.

Keppel Infrastructure Trust (KIT) announced earlier this month that it had entered into a conditional agreement to acquire the remaining 30 per cent stake it does not already own in SingSpring Desalination Plant from Hyflux for $12 million.

Asset sales in the liquidation process would likely bring in less than $200 million, a fraction of the $2.8 billion in total investor claims against Hyflux, Bloomberg reported.

Hyflux’s judicial managers were appointed as its liquidators on Wednesday.

They had asked for Utico to pay $6,000 in legal costs following Utico’s intervention on July 12, noted media reports. Justice Aedit Abdullah ordered Utico to pay $5,000.

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