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Utico clarifies about advisors fees and Hyflux assets

  • Utico clarifies about advisors fees and Hyflux assets
  • States S$50m pot is linked to scheme timing and to Hyflux asset value.

About the entity

Utico
UTICO is U.A.E’s largest private Build-Own-Operate company for Desalination with capacity of 160,000 m3/day Sea water Reverse Osmosis plant and Gas based Power generation capacity of 120 MW and 270 MW.
Web
Schneider Electric
Idrica

Themes

Utico in a statement said that its January 28th 2020 letter was clear in many respects about its intention to pay S$40m per the RA and increase it to S$50m to save time and hence money by passing the scheme early.

Having said that, with loss of time, its ability to pay for the deal with value leakage at Hyflux would any way reduce the pot to S$30m.

Utico said it does not support Hyflux’s proposal to pay its new advisors at the cost of previous advisors or even of SIAS advisors. This will be grossly unjust and manipulation of the situation without recognizing Utico’s true intent.

It stated that most Hyflux assets stakeholders like offtakers, lenders and minority shareholders have approached Utico to fix the situation to preserve value.  

Utico said that without action in the coming weeks, there could be further deterioration of value and also real loss of the assets. This included assets in Oman and Algeria where severe losses have made the value of Hyflux shares effectively zero.  Without additional investments and timely action these assets, currently zero, will result in even further direct liabilities on Hyflux and create creditors heretofore unknown.

Further, the daily penalties on assets makes the recovery for any creditor unlikely based on these assets alone, and Utico too was now wondering that if the scheme will take more time, then these assets as of now under the control of offtakers, lenders and minority shareholders will mean more legal battles for years and incur further costs in tens of millions.

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 S$120m penalties at this rate!. Servicing lenders itself was not possible at this rate which will leak even more value.

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 was the only party working to do so, engaging with all stakeholders and hence knowing these aspects.

It is also very confusing why investors who have no knowledge 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.   

Utico stated that it has provided sufficient financial information to the creditors and standing including financing from its parent group, IDB  and Utico’ s own liquidity itself which provides financing of over S$440m. This information will also be provided to PnP who chose option 2 where they have deferred payments. It also stated that Utico was prepared to offer 3-4% of Hyflux in addition to the option 2 to PnP if they approve the deal. Hyflux and SIAS failed to call for this vote asked by Utico during the first week of March which would have enabled this aspect.

Utico stated its actions are in the favour of all creditors and made with bonafide intent and action to ensure a scheme is passed this month itself, which if later will result in complete loss of such critical assets and Hyflux value dropping to only its credentials which by any estimate will be less than half.