Hyflux said early on Friday that creditor Malayan Banking, or Maybank, was terminating its collaboration agreement with the troubled Singapore water infrastructure player with immediate effect due to its failure to reach a binding deal with a bidder or investor.
“This constitutes a breach which is incapable of remedy under the collaboration agreement,” the letter said, according to the Hyflux filing.
In addition, Maybank has sent notices to Singapore water regulator PUB and the Energy Market Authority of Singapore, Hyflux said.
“These notices are in respect of an enforcement event and acceleration of the maturity of all amounts owing under the Tuaspring financing documents,” Hyflux said in the filing. “Maybank has also stated its intention to appoint receivers and managers over the assets of Tuaspring save for the desalination plant and shared infrastructure.”
Maybank’s loans to Hyflux were substantial: A CGS-CIMB research note from August said that the exposure was at S$658.6 million as of the end of the first half of last year.
The Malaysian bank had agreed to hold off on enforcement action against Hyflux on the condition that the Singapore company would execute a deal with a successful bidder or investor which would fully settle with Maybank.
A deal had appeared within reach and Maybank had provided Hyflux with multiple deadline extensions of their agreement.
SM Investments, a consortium of the Salim Group and the Medco Group, had entered a binding agreement in October to invest S$530 million for a 60 percent stake in Hyflux, which had filed for court protection in May. Hyflux had said 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 of 2018.
But in early April, Hyflux terminated the deal, saying it had “no confidence” that SM Investments would complete the investment after the Indonesian consortium failed to provide a written commitment it would do so.
The deal’s termination led to Singapore’s water regulator PUB rescinding its extension of the default cure period for the contractual obligations of Hyflux’s Tuaspring Desalination Plant. On Wednesday, PUB issued a notice to Hyflux that it would terminate its water purchase agreement (WPA) and take over the plant.
Maybank;s move was likely to mark another headache for Hyflux: “The termination of the collaboration agreement is expected to have a material impact on the financial performance of the group,” Hyflux said.