Banks initially not told of power plant to prevent information leak, court told
It was kept from lenders to protect company’s strategy from rivals, Olivia Lum’s counsel says
[SINGAPORE] Hyflux had initially withheld from bank lenders certain information about the Tuaspring project, including a power plant, to protect its strategy from rivals, the lawyer defending Olivia Lum said.
Jeanne Soh, managing director for structured finance in the Asia-Pacific at Sumitomo Mitsui Banking Corporation (SMBC), was told of the “strategic” reason in the trial of Hyflux’s former chief executive Lum and five others on Tuesday (Oct 28).
Lum’s counsel Jaikanth Shankar recounted the testimony by an earlier prosecution witness, Nah Tien Liang, which explained why Hyflux had kept mum about the power plant to the group of six banks, including SMBC, in October 2010, when they came together to consider financing of the project.
Nah, Hyflux’s vice-president of investment at the time, had told the court that the banks were initially not informed about the power plant to ensure the company’s bidding strategy would not be leaked to its competitors.
“There was nothing unreasonable of Hyflux’s desire that there was no leak about this strategy,” said Shankar in his cross-examination of Soh on Day 24 of the trial. She concurred.
The power plant in the Tuaspring project has become a focus in the trial because the six accused allegedly kept the material information about Hyflux’s venturing into the electricity business from the investing public.
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Lum is facing charges of non-disclosure of material information in announcing the Tuaspring project win in March 2011, as well as in the issue of preference shares the following month, relating to Hyflux’s entry into power generation.
Four directors – Gay Chee Cheong, Teo Kiang Kok, Christopher Murugasu and Lee Joo Hai – each face similar charges as Lum, except that they were accused of neglect and causing Hyflux’s failure to disclose the information in the March 2011 announcement.
Hyflux’s former chief financial officer Cho Wee Peng is contesting a charge of conniving in the water treatment company’s omission to disclose the material information about Tuaspring.
Shankar took Soh through a few e-mails between Hyflux and SMBC, and got the witness to confirm that Hyflux had upon unveiling its plans for a power plant for the Tuaspring project, “voluntarily and openly” shared information with the banks including its strategy, particulars of the power plant and its financial model for the project.
Hyflux had “moved reasonably quickly” to share the information in a transparent manner, the counsel pointed out to the witness, who agreed.
She also agreed that there was no suggestion from any of the six banks that they did not manage to obtain any information they sought from Hyflux.
Shankar then brought up Soh’s evidence on the banks changing the wording from “approval” to “management support” after the group learnt of Hyflux’s plan for a power plant as part of the Tuaspring project.
She concurred that the amended wording in the letter would reflect that the loan had not obtained credit approval yet, but she reiterated that the banks preferred to use a “softer language” and decided on “management support” instead of “approval”.
Soh has concluded her testimony, and another bank’s executive will take the stand on Wednesday.
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