Singaporean water treatment and power firm Hyflux Ltd has started a court-supervised debt reorganization process to protect the value of its business after reporting unprecedented losses.
The group on Tuesday applied to the city-state’s high court, seeking a six-month moratorium against certain actions, including court proceedings, against it.
The filing under Section 211B of the local companies act comes with an automatic 30-day reprieve.
Hyflux has also decided not to pay S$14.9 million (US$11.1 million) of interest due on Monday on its perpetual securities, some of which individual investors had bought through automated teller machines (ATMs) in Singapore two years ago.
“This is the first time we are seeing a bond sold to mom-and-pop investors through an ATM running into problems,” said Ezien Hoo, a Singapore-based credit analyst at Oversea-Chinese Banking Corp (華僑銀行). “We expect such investors to take a hit as their securities are subordinated.”
Hyflux last year posted its first annual loss since listing and the losing streak has continued into the first quarter of this year.
The turnabout in fortunes for the company, whose founder Olivia Lum (林??) was a poster child for local entrepreneurs, adds to signs of pressures that smaller borrowers in the Singaporean debt market face.
Prolonged weakness in the local gas market has resulted in depressed electricity prices, putting a strain on Hyflux’s finances, causing “short-term liquidity constraints in recent weeks,” the company said in the filing.
The court relief would provide room for the group to work with advisers on the reorganization, which includes discussions with strategic investors and asset divestment, it said.
Bloomberg News earlier reported that the group was planning to seek court protection to fend off creditors.
Hyflux has hired WongPartnership LLP (王律師事務所) as legal advisers and Ernst & Young Solutions LLP as financial advisers.
It has also asked for its shares and securities to be halted from trading, as its financial position remains unclear pending the outcome of the reorganization process.
“For homegrown successes like Hyflux, whose business continues to be relevant for Singapore’s future economy, the enhanced restructuring regime is conducive to pursuing a swift and collaborative outcome,” WongPartnership said in an e-mailed statement.
Hyflux would engage with stakeholders to preserve value, it added.
Hyflux has been in talks to sell a stake in its single-largest asset, the Tuaspring project, which combines Southeast Asia’s largest desalination plant with a gas turbine power plant.
It has also been negotiating a potential divestment of the Tianjin Dagang desalination plant.
That Hyflux was able to win contracts over the past few months could mean that its business, excluding Tuaspring, is not so dire and that the firm might just need time to recapitalize its balance sheet, Hoo said.
Hyflux, which was worth nearly S$2.1 billion at its peak in late 2010, now has a market value of S$165 million. It is the second-worst performer on Singapore’s FTSE Strait Times All Share Index this year, with a 39 percent decline, trailing only Noble Group Ltd (來寶集團).
The company earlier this month said it was in talks with potential investors to inject funds.
Its net loss widened to S$22.2 million in the three months that ended on March 31, from a restated S$64,000 a year earlier.
Hyflux’s net debt surged to 165 times earnings before interest, taxes, depreciation and amortization as of March 31, from about 32 times at the end of last year, according to data compiled by Bloomberg.
In addition to the coupon that it would not pay next week on its perpetual securities, the company also has S$100 million of 4.25 percent bonds maturing in September.
Hyflux’s former success had won accolades for its founder, an orphan who left a career in pharmaceuticals to start her own business with S$20,000 raised from selling her car and apartment.
The company, which became Hyflux, won municipal contracts in Singapore and expanded into new markets such as Malaysia, China and India.
Lum was named to government bodies, including International Enterprise Singapore, and appointed as a member of parliament in a seat reserved for distinguished community members.
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