Hyflux founder Lum to give up stake in restructuring deal

Singapore 50 dollar bill

Hyflux founder and CEO Olivia Lum will be giving up her founding stake as part of the troubled water infrastructure player’s restructuring deal, according to her prepared remarks for a townhall meeting on Friday of holders of the company’s notes and perpetual securities.

“I started this company some 30 years ago and built it into a company with mega infrastructure projects all over the world. This company is very personal to me. I share your pain as I am 100 percent aligned with you,” Lum said, according to the prepared remarks filed to SGX on Friday.

She said that SM Investments was essentially taking over Hyflux, unlike other restructuring deals, where the founder might remain in the company.

“I have volunteered to give up receiving any management shares, meaning that my founding stake in Hyflux will be reduced to almost zero,” she said.

In October, consortium SM Investments entered a binding agreement to invest S$530 million for a 60 percent stake in the troubled water-treatment and power generation company.

In the filing, Hyflux said that prior to the SMI deal, it had signed 16 non-disclosure agreements during its search for a strategic investor, with offers ranging from a total investment, including equity and shareholders loan, of S$400 million to S$600 million, with equity stakes ranging from 51 percent to 86.4 percent under various potential structures.

Lum also said that without support for the SMI rescue plan, Hyflux would likely face liquidation.

“As some of our assets are located in challenging jurisdictions overseas, liquidation will result in a much less favorable outcome for all stakeholders,” she said.

Slides for the presentation showed estimates that the S$1.90 billion of senior unsecured obligations would likely net only S$74.5 million to S$170.8 million in liquidation scenarios.

The restructuring will include unsecured financial creditors, such as banks and noteholders, contingent creditors, perpetual security holders, and preference shareholders, the slides showed.

It added that the proposal includes a cash and equity component in return for extinguishing securities, which would allow a partial return immediately and participation in the business ahead.

In May, Hyflux had filed for court protection, saying the oversupply of gas in Singapore’s market had resulted in depressed electricity prices, which hit earnings in 2017 and drove losses in the first quarter.

In addition, the company said in May that its plan to divest the Tuaspring project in Singapore and the Tianjin Dagang plant in China have taken longer than expected, adding stress to the business.

Hyflux shares have been suspended from trading since May 23.

Get the Shenton Wire morning briefing in your inbox