Some positive news emerged last week on the proposed future flow transaction from water treatment company, Hyflux (see ASR, 10/11/04). Last August, Deutsche Bank Securities was appointed to evaluate the securitization of SingSpring, a wholly owned subsidiary of Hyflux, currently developing the first water desalination plant in Singapore. The plant is contracted to supply water to the Public Utilities Board for the next 20 years.

Initially, Hyflux was targeting completion of a deal by the end of 2004 for accounting reasons. When that deadline passed, there was some speculation about what would happen to the deal.

However, Hyflux recently sold a 50% stake in the project to the state-owned investment agency, Temasek Holdings, for S$30 million. This helped the company free up cash for foreign investments in China, India and the Middle East and lowered its debt-to-equity ratio from 0.72 to 0.11.

The divestment is a first step in securitizing or refinancing SingSpring, according to senior company officials. The future flow deal is still being looked at seriously, as are potential alternatives, with rating agencies having studied potential structures. Hyflux would use securitization as a corporate finance exercise, allowing it to shift assets off balance sheet and for funding new ventures.

If a transaction does go ahead, it would likely launch in late summer. Some view the delay as a blessing. By July, the project will be up and running and, it is argued, the longer SingSpring is operational, the stronger its credit becomes.

Copyright 2005 Thomson Media Inc. All Rights Reserved.

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