A consortium comprising two major Indonesian groups - conglomerate Salim Group and energy giant Medco Group - has agreed to give Hyflux a S$400 million equity injection, in exchange for a 60 per cent stake in the water treatment firm once it has settled all its debts.
The consortium, SM Investments, will also grant Hyflux a shareholder's loan of S$130 million and a debtor-in-possession loan of S$30 million to help finance it through the restructuring.
With this offer on the table, it falls to Hyflux to negotiate terms of a debt restructuring with each of its creditor groups, which could include debt-for-equity swaps.
The S$530 million in cash from SM Investments will be released to Hyflux only if it can reach a deal with its creditors via a court-sanctioned scheme of arrangement.
The entire Hyflux group had bank debts of about S$1.84 billion in June. Note holders are owed S$265 million. Perp and preference shareholders are owed S$900 million.
Since May, Hyflux has been seeking strategic investors to participate in its restructuring exercise. It entered non-disclosure agreements with 16 potential investors, and discussions were narrowed to eight parties. Hyflux's board of directors "unanimously selected" the Salim-Medco group after a rigorous process, chief executive Olivia Lum told reporters on Thursday.
The Salim Group owns 60 per cent of SM Investments, while Medco owns the rest.
Anthony Salim, chairman of the Salim Group, told a signing ceremony at Hyflux Innovation Centre on Thursday evening: "We've been interested in Hyflux for a long time, except at that time it was not reachable... I'll make sure the CEO of this company, the strong lady, is going to continue her leadership for a few years, if not more."
Arief Sidarto, chief executive of SM Investments, said: "We believe that Hyflux has trophy assets we'd like to keep intact. Our view is that Hyflux as a whole should be kept together and we believe we can grow it into a platform that all of us and Singapore can be very proud of."
Hyflux had recently asked Maybank to give it till Oct 29 to find a buyer for Tuaspring, its integrated water and power plant. Hyflux owes Maybank S$518.4 million, secured by the plant.
Ms Lum said: "We will have to engage Maybank... With this restructuring successfully proceeded, we will not attempt to sell any more assets."
Arifin Panigoro, founder of Medco Group, told reporters: "Our aim is to further grow Hyflux. With our experience and strong track record in owning and operating businesses in energy, renewables, utilities and gas across Southeast Asia, we are confident we can unlock the full potential of Hyflux."
The Salim Group also controls Pacific Light Power, an 800 megawatt power generation company in Singapore.
"We are not a new player in Singapore power supply," Mr Salim said.
Asked how much of their investment Hyflux's perp and pref shareholders can expect to recover now, Ms Lum said: "Today is a happy day... Subsequently, we will have a lot of things to do. We will leave it to all the experts to work out a plan."
Hyflux is expected to take about a month to speak with all its creditors. It is unlikely that a scheme of arrangement can be signed and sanctioned before the Dec 18 deadline when Hyflux's debt moratorium will expire, so the company is expected to appeal to the Singapore Court for more time.
Mr Sidarto said: "We have a close relationship with many financial institutions... We have a game plan."
The sale of the controlling stake in Hyflux to outsiders will also require relevant waivers from national water agency PUB and other authorities, though this is not expected to be an issue.
Asked by one reporter to explain how Hyflux got into the state it is in now, Ms Lum replied: "I think today is a happy day. We just caught the flu. Like what Pak Anthony Salim just told me, 'Don't worry Olivia, you just (caught a cold), it's okay'. Because the entrepreneurship will still continue, and together with two big bosses here, Hyflux will have a lot of support."
This article was first published in The Business Times. Permission required for reproduction.