Singapore—Embattled water treatment company Hyflux has received an extension from Middle East utility company Utico on its term sheet signature validity.
Originally expiring on June 17, the term sheet validity of Utico has been extended by 10 days to June 27.
Furthermore, Utico said that if the two companies enter into a binding agreement according to the new timeline, it is requesting for a town hall meeting for perpetual securities and preference (PNP) shareholders for the week beginning July 7, 2019.
A term sheet is a document containing an outline of the material terms and conditions of a business agreement.
The extension was given after Hyflux was able to meet its key milestones on June 10 for submitting information, as well as in the meetings and discussions that followed.
Utico said in a statement that its Utico’s Board of Directors made the choice to extend the validity of the term sheet after a series of meetings between the senior management and the advisors of the utility company and the Singaporean water firm.
The Managing Director of Utico, Richard Menezes, said, “Utico is interested to acquire Hyflux Ltd. as a going concern. Since with further passage of time the valuation of Hyflux will have an adverse impact and addition of further risks, a long stop offer validity and conditions were set by its Board.”
According to the Board of Utico, extending the deadline on term sheet signature validity of its agreement with Hyflux, as well as putting the long stop date of June 27 into effect, is in the best interests of all stakeholders concerned—which include PNP holders, clients, and creditors.
Mr Menezes said, “For all stakeholders, including PNP, we believe that further loss of time and uncertainty will lead to greater losses in value as well.
“Such a situation was not caused by Utico,” he said, and that the company’s “goal is to secure a win-win resolution with an agreed quick transaction process with all stakeholders.”
Furthermore, he added that “This proposed timeline will help to ensure a clear road map with a viable business outlook for the company, in turn leading to the achievement of the required successful restructuring.”
The Middle Eastern utility company reiterated its prior commitment concerning settlements for PNP shareholders, which includes a partial cash redemption, as well as “hope for eventual full realization of investment, with a plan and potential exit option.”
According to Utico’s Managing Director, “As a key part of the overall deal, small PNP holders of up to S$2,000 to 3,000 could get up to a 50% cash redemption with a possibility of additional upside, while the rest of the PNP holders could get a staggered and cascaded deal.”
Moreover, “for all banks and vendors, I believe that working with Utico as owner of Hyflux will be a better experience, since we have never defaulted with any bank or vendor in our long history of success. Also, Utico typically has one of the lowest gearing ratios for a major international water player. I believe that it could be a win-win-win relationship,” Mr Menezes added.
The specifics of all these settlements will be disclosed upon the signing of a binding agreement by Hyflux and Utico.
Utico’s Managing Director emphasized that he is expecting a deal that will be fair and reasonable for all of Hyflux’s investors who support the agreement, particularly PNP shareholders who have much to lose.
Utico may infuse a S$400 million investment, and Oyster Bay Fund is looking to invest as much as S$500 million into Hyflux. Another third strong possible investor, an unnamed desalination plant company, gave a non-binding letter of intent for its assets. Hyflux is continuing to talk to potential investors for much-needed fund infusions./ TISG
Read related: Hyflux’s 34,000 retail investors may get cash redemption from white knight Utico