Business & Economy After severe cost-cutting, Hyflux's Olivia Lum says the company has enough funds...

After severe cost-cutting, Hyflux’s Olivia Lum says the company has enough funds for 2-3 months operations

The company let go of employees and reduced the salaries of its senior management team, its headquarters and operations also underwent downsizing

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Singapore–Hyflux founder Olivia Lum has said in court documents that the embattled water firm has enough funds for two to three months, following some very strict cost-cutting measures.

After a debt moratorium was imposed on Hyflux last year, the company let go of employees and reduced the salaries of its senior management team. It’s headquarters and operations also underwent downsizing.

However, the beleaguered water treatment company does not have much time left and urgently needs to secure new investors to prevent liquidation and to continue operations.

Hyflux, however, succeeded in avoiding an attempt from seven banks, to whom the company owes almost S$ 650 million, to have begun the process to have the company and one of its important units to be placed under judicial management.

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Together, these banks represent 31 percent of senior debt, the Straits Times reports.

According to Ms Lum in an affidavit that was filed on April 30,

“Far from being a ‘mercy killing’, a judicial management for a company as complex as Hyflux group is likely going to be a protracted and expensive process.

The fact that the seven (banks) do not appear to have addressed the practical difficulties and potential costs associated with having judicial managers… to keep it running as a going concern strongly suggests that the real motivation is in fact liquidation.”

The company received an extension on the debt moratorium, which had originally been set for May 24, to May 29. Whether or not Hyflux will receive additional extensions is contingent on (quote) and other conditions.

However, the water treatment firm did receive some good news when Middle Eastern utility company, Utico, Hyflux’s new would-be White Knight, upgraded its offer from a non-binding letter of interest to invest S$ 400 million to a binding sheet term last Sunday, May 12.

A Reuters report quotes managing director Richard Menezes as saying that the investment from Utico will go towards equity, working capital purposes, as well as possible urgent interim funding.

On Monday, May 13, Hyflux said it was finalizing with Utico, though no additional details were given.

Ms Lum stated that she is currently discussing investments in the company with several possible investors. The company’s financial advisers, nTan, is also in talks with would-be investors in South America, Taiwan, and Singapore.

If the company is permitted to continue with its reorganisation endeavours, it will keep on looking for ways to maintain liquidity via a strategic infusion of funds, and therefore be able to finish its current projects.

Ms Lum said this would preserve the company’s value and be able to deliver other financial benefits.

The significant assets that Hyflux possesses are its equity stakes in its downstream subsidiaries. These deliver the company’s primary businesses in engineering and procurement and operations and maintenance.

One example of this is the Qurayyat Independent water project in Oman, although the Qurayyat project is yet to become commercially operational because of technical issues connected with equipment purchased from third-party suppliers and civil and marine works carried out by third-party contractors.

Should the banks’ plan for judicial management push through, the owner of the plant in Oman, Qurayyat Desalination, will possibly end the engineering, procurement, and construction contracts, particularly if the judicial managers decide to withdraw from Qurayyat.

According to Ms Lum, “There is a larger purpose to maintaining Qurayyat.

There is an increasing demand for desalination plants in the Middle East. This is borne out by two of the more keen potential investors from this region. So completion of the (plant) makes the investment a more attractive prospect for strategic investors.”/ TISG

Read related: Hyflux reveals Middle Eastern utility company Utico is its new would-be white knight

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