Singapore’s efforts to promote itself as a global restructuring hub have been hit by a court’s decision to grant a distressed water company an unprecedented string of extensions as it battles to avoid liquidation.
A court in the city-state said on Friday that the next hearing in the case of Hyflux would take place on November 16 following a decision on Wednesday to grant the water management group a 12th adjournment. The Singaporean company has become saddled with S$2.7bn ($2bn) in unsecured debt after years of soaring growth came to a halt.
The latest delay in the Hyflux case is challenging authorities’ efforts to transform Singapore into an international restructuring hub by rolling out reforms that bring its restructuring and insolvency regime closer to that of the United States’ Chapter 11 process.
The Hyflux case stems back to 2018, when it sought a court-supervised reorganisation of its liabilities. That created a case that would become the biggest test of what was at the time a newly revised legal regime for dealing with restructurings and insolvencies in Singapore.
Under that regime, a group of Hyflux’s unsecured creditors — which are owed S$940m and include global financial firms BNP Paribas, Mizuho Bank and Standard Chartered — have sought the appointment of a judicial manager to run the business while a deal on its debt is hammered out. The outcome also concerns more than 30,000 individual investors who face significant losses.
But the court has so far failed to appoint a judicial manager and has for more than two years delayed proceedings due to Hyflux presenting a series of names of potential bidders for the company.
“The unsecured working group’s tolerance has been tested to its limit and any trust and confidence in management has long since vanished,” Cosimo Borrelli, managing director at Borrelli Walsh, a restructuring firm advising the banks, wrote in an affidavit in August seen by the Financial Times.
The frustration among creditors comes despite amendments by Singapore to company law in recent years designed to improve the restructuring process. The latest change — which consolidates restructuring and insolvency rules into one piece of legislation and updates them to be “aligned with international best practices” — came into force in July.
People close to the situation said that the repeated adjournments made it appear that Singapore was reluctant to make the kind of decision that could potentially put a large, high-profile bankruptcy on the city’s doorstep.
But some have defended Singapore’s progress on this front. Lawrence Loh, director of the National University of Singapore’s centre for governance, said Hyflux’s judicial process “left no stones unturned” despite being “a bit lengthy”.
The latest adjournment, however, “is now the thin red line”, Mr Loh added. “We’ve reached a point where we cannot tolerate any further depreciation of the company’s value.”
Hyflux declined to comment on the matter.
Singapore’s efforts to streamline its legal regime and raise its profile as a restructuring hub come as it faces intensifying competition from other Asian centres, in particular Hong Kong.
Judges in Hong Kong have for years struggled with the absence of a comprehensive statutory regime to cover insolvencies. But a breakthrough was made in early 2020 when courts recognised the liquidation of a mainland Chinese company for the first time.
The Monetary Authority of Singapore, the country’s central bank, as well as police and the city’s Accounting and Corporate Regulatory Authority in June launched a criminal investigation into Hyflux and its current and former directors “for suspected false and misleading statements and breaches of disclosure requirements . . . as well as non-compliance with accounting standards”.
The probe came more than a year after authorities began an initial review targeting Hyflux.