Utico warns Hyflux's asset leakage if restructuring scheme further delays

The investor is wondering why the scheme is being deferred.

Utico cautioned that if the approval for Hyflux’s restructuring scheme becomes delayed beyond March, the embattled water treatment firm will see a complete loss of critical assets and its value dropping to only its credentials, according to a press release.

The potential white knight estimates the value to be reduced to less than half of its original.

Utico asserted that it was clear about its intention to increase the advisor fee pot to $50m from $40m, intending to save time and money by passing the scheme early. With loss of time, the value leakage at Hyflux would reduce the pot to $30m.

“Having noted this, Utico is wondering why the scheme was being deferred so long when there was no action for value to be maintained, or creditors seeking to know what actions are being taken for the same,” Utico said in a statement.

The firm cited assets in Oman and Algeria, where severe losses have made the value of Hyflux shares effectively zero. It noted that without additional investments and timely action, these assets will result in further direct liabilities on Hyflux and create new creditors.

It also added that the daily penalties on these assets alone would make the recovery for any creditor unlikely. It expressed worry that these assets, currently under the control of offtakers, lenders and minority shareholders, might bring more legal battles if the scheme delays.

“[Oman asset] Qurrayat by itself has a negative return for shareholders with penalties being incurred every day and to continue per lenders for two more years. This alone will result in about $120m penalties at this rate!” the firm said.

Utico added it does not support Hyflux’s proposal to pay its new advisors at the cost of the previous advisors or even of SIAS advisors, deeming it to be “grossly unjust and manipulation” of the situation “without recognising Utico’s true intent.”

It also found “very confusing” why investors who do not know of Hyflux and its assets and have not met these stakeholders would consider paying hundreds of millions to creditors.

“Utico doubted the intent behind the letters for investment sent to Hyflux for announcement and whether it was a pure ploy only to delay the scheme itself and lower recovery eventually through value leakages,” the firm added.

Utico also stated that it was prepared to offer 3-4% of Hyflux in addition to the option 2 to PnP holders if they approve the deal. It said that Hyflux and SIAS failed to call for this vote the investor asked during the first week of March.