4/5/2019 Hyflux says Salim-Medco rescue is off; both sides play the blame game, Companies & Markets

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blame-game-0

HYFLUX SAGA

Hyflux says Salim-Medco rescue is off; both sides

play the blame game
The two parties are also laying claim to the S$38.9m deposit that Salim-Medco put into
escrow last year, when it agreed to be Hy ux's white knight

 FRI, APR 05, 2019 - 5:50 AM

MARISSA LEE  marilee@sph.com.sg  @MarissaLeeBT

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4/5/2019 Hyflux says Salim-Medco rescue is off; both sides play the blame game, Companies & Markets - THE BUSINESS TIMES

Hy ux said on Thursday that a key rescue deal from the Salim-Medco group is o cially o , with just weeks
to go before the water and power plant company loses court protection from creditors. PHOTO: LIANHE
ZAOBAO

Singapore

HYFLUX said on Thursday that a key rescue deal from the Salim-Medco group is o cially
o , with just weeks to go before the water and power plant company loses court
protection from creditors.

Hy ux has cancelled scheme meetings scheduled for April 5 and 8. There is also no need
for shareholders to attend an extraordinary general meeting scheduled for April 15, the
company said.

Now both sides are arguing over who killed the deal. The answer may determine who gets
to pocket the S$38.9 million deposit that Salim-Medco (SMI) put into escrow last year,
upon agreeing to play white knight for Hy ux.

Reacting to Hy ux's announcement on Thursday, SMI, led by Indonesian billionaire

Anthoni Salim, said it was "surprised" by Hy ux's "purported termination" of the rescue
deal, and will be taking legal advice in relation to Hy ux's action.

SEE ALSO: Distressed Hy ux says Salim-Medco rescue is o ; but investor 'surprised' by

news

In a late Thursday night ling, Hy ux said it wrote to the investor to request a clear and
unequivocal written con rmation of its commitment, and stated clearly that the company
would have no choice but to terminate the restructuring agreement if the investor
declined to do so.

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4/5/2019 Hyflux says Salim-Medco rescue is off; both sides play the blame game, Companies & Markets - THE BUSINESS TIMES

"Regrettably, the investor, in a letter from its lawyers dated 4 April 2019, declined to
provide the written con rmation sought," Hy ux added.

Salim-Medco was supposed to invest S$530 million into Hy ux in exchange for a 60 per
cent stake once Hy ux's debts had been cleared, an investment that formed a key pillar in
Hy ux's restructuring plans.

But SMI had a change of heart in recent weeks, citing concerns about Hy ux's working
capital requirements and the cash distribution plan under the proposed restructuring.

On Thursday, Hy ux said it had tried to meaningfully engage with the Indonesian investor
group on multiple occasions: "However, in light of the investor's responses and conduct,
the company has no con dence that the investor is prepared to continue to complete the
proposed investment."

It added: "They have also not refuted the statements in the media that SMI was 'slated to
walk away' from the deal. Without the con rmation from SMI to dispel the overhanging
uncertainty over this deal, it would not be possible for the stakeholders to have a proper
vote."

E ectively, Salim-Medco has repudiated the restructuring agreement and Hy ux has

accepted its repudiation, the Singapore company said.

"The restructuring agreement is therefore terminated," Hy ux stated.

With Hy ux's court-sanctioned reprieve from creditors set to expire on April 30, the
company now nds itself with its back to the wall.

Still, Hy ux sought to reassure stakeholders on Thursday, and promised to "pursue all

other viable strategic opportunities" and restart talks with key creditors and stakeholders.

Recent actions by national water agency PUB have also put it in a better position to nd a
new white knight, Hy ux said on Thursday.

Last month, PUB said if Hy ux subsidiary Tuaspring Pte Ltd (TPL) fails to cure its defaults,
resulting in a termination of the Water Purchase Agreement, PUB will acquire the loss-
making Tuaspring desalination plant for zero dollars, and without seeking compensation
from TPL.

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4/5/2019 Hyflux says Salim-Medco rescue is off; both sides play the blame game, Companies & Markets - THE BUSINESS TIMES

PUB had given TPL until April 30 to cure its defaults, but the termination of the Salim-
Medco deal means TPL's deadline will be brought forward to Friday, April 5. Since Hy ux
cannot help TPL by Friday, PUB is expected to take over the plant in early May.

Potential investors who would have preferred to invest in Hy ux but not the water plant
may thus return to the table, Hy ux suggested. "(This) development could potentially
enable the company to reach out to a wider pool of investors who may not otherwise have
been interested in an investment in the group had this asset remained within the group,
and for which PUB's approval for a change in control of such asset will be required."

As for the loss-making Tuaspring power plant on the same site, ownership will remain with
Hy ux.

Hy ux might appeal to the Singapore High Court for more time to nd a white knight, but
the Court will need to be convinced that extending Hy ux's debt moratorium beyond April
30 can give creditors a better outcome than liquidation.

The Hy ux board will "quickly re-engage with previous interested parties" who had bid for
Hy ux alongside SMI last year, Hy ux chief executive Olivia Lum told David Gerald, who
leads the Securities Investors Association (Singapore), or SIAS.

Mr Gerald said: "She said the board needs some time to negotiate with interested parties
and has asked that they be given some time and space to work on an alternative proposal
to avoid liquidation. SIAS calls on senior creditors to give the company a chance to provide
an alternative proposal and not put the company under liquidation hastily, in which case
the retail investors who are the perps and preps holders will lose everything."

Hy ux has more than 2,500 employees worldwide. Asked if they would be let go if no
white knight emerges by April 30, Hy ux said it would now hold talks with its creditors, and
is unable to say more than what has been announced; it said it would give updates
through its SGX announcements.

And when asked whether PUB might recruit some Tuaspring employees to run and
maintain the desalination plant, Hy ux said it is unable to speak on PUB's behalf or
comment on whether PUB's recruiting plans.

Hy ux's position now is that SMI repudiated their restructuring agreement, so Hy ux is

entitled to SMI's S$38.9 million deposit.

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4/5/2019 Hyflux says Salim-Medco rescue is off; both sides play the blame game, Companies & Markets - THE BUSINESS TIMES

Salim-Medco sees it di erently, so the matter may be bound for the courts. "SMI has at all
times abided by the restructuring agreement," it said.

"SMI has been waiting for Hy ux to disclose further material information following
multiple requests for such disclosure. The delay in disclosing this material information has
prevented SMI from determining a workable allocation between working capital and the
settlement amount to creditors under the restructuring agreement."

Salim-Medco reiterated that it had issued Hy ux notices to remedy threats to the

Tuaspring and Magtaa projects on March 18 and 25 respectively. These refer to the now
likely termination of Tuaspring's water contract with PUB, and a notice from Magtaa's
o takers to terminate its water contract last December, which SMI said it learned about
only three months later.

"These threats have not been remedied," Salim-Medco said, adding that it had learned of a
threat to a third major project on Wednesday.

But Hy ux, in a statement late on Thursday, dismissed the point about a "threat" to the
third project, SingSpring Trust, in which it has a 30 per cent minority interest. It said that
the majority interest holder, Keppel Infrastructure Fund Management (KIFM), had written
to Hy ux on March 29 to say that the holding of the Scheme Meetings entitled it to
exercise buy-out rights, that is, KIFM may choose to buy part or all of Hy ux's interest in
SingSpring for value, subject to regulatory approvals, and sought to reserve those rights.

Speci cally, KIFM had asked for con rmation that it would not be subject to the Schemes
proposed, and that its buy-out rights would not be compromised or a ected by these
Schemes.

Hy ux said: "It is important to note that KIFM's letter does not indicate whether it intends
to exercise such buy-out rights (which it is under no obligation to do so), and there can be
no assurance that KIFM will ultimately choose to do so. Accordingly, there is no 'threat to a
third major project' as asserted by the investor (SMI)."

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