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Pison receives 158 tenders from Hyflux creditors, puzzles over UWG's reluctance to engage

POTENTIAL Hyflux investor Pison Investments on Tuesday said it has received 158 tender application forms from noteholders and other eligible creditors to date, but efforts to engage with the unsecured working group (UWG) of seven banks have fallen through.

The banks are Mizuho, KfW, Bangkok Bank, BNP Paribas, Standard Chartered Bank, CTBC Bank and the Korea Development Bank. In August, the group filed its application for a judicial management order, after the Court gave the go-ahead for it to be carved out of Hyflux's debt moratorium. This was because the UWG felt it could no longer trust Hyflux's management to lead any restructuring effort.

Given the lack of progress in moving matters forward through the UWG's advisors, Pison took the initiative to reach out to the members of the UWG directly through the invitation advisor, Corporate FinEdge, with its proposal to buy out their debt. Pison said it will give another update on the outcome of the progress with the UWG members.

Pison is the investment vehicle of Indonesian magnate Johnny Widjaja. It had in early July made a formal cash offer for the debts of Hyflux's bank lenders, noteholders and other senior unsecured creditors via a "reverse Dutch auction". (In a reverse Dutch auction, potential sellers make the bid rather than the buyer. The bids start low and go higher until the money set aside for the purchases - S$200 million in this case - is exhausted. Pison's offer is subject to a minimum offered discount of 91 per cent.)

In its letter on Tuesday addressed to Hyflux's executive chairman and Group chief executive Olivia Lum, Pison said that it had on Aug 31 arranged for a townhall meeting with the noteholders via Zoom, for Corporate FinEdge to walk them through the key terms of the invitation memorandum and to address the questions they had. More than 40 noteholders attended the virtual meeting, and the questions were answered by Mr Widjaja. Pison assessed that the noteholders appeared "genuinely interested" in the offer.

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It added that it was "very encouraged" that a "significant portion" of eligible creditors had taken part in the tender, including established financial institutions and corporations such as major banks and multinational corporations.

Notwithstanding that the extended expiration deadline of Sept 4, 2020 has passed, it continues to receive submissions of tender application forms and will admit these late submissions for consideration. It has also received indications from a few significant eligible creditors that they are still in the process of obtaining board and management approval to submit their applications as their internal processes take time. Pison may therefore consider further extending the expiration deadline, it said.

That said, Pison has yet to receive any tender applications from the members of the UWG. It has reached out to each member of the UWG through letters from its solicitors CNPLaw in July. CNP subsequently corresponded with the UWG's solicitors Hogan Lovells Lee & Lee through letters in August through September, with Hyflux's solicitors from Clifford Chance and Cavenagh Law copied.

Pison said it has been actively trying to engage with the UWG and has offered to meet and talk with its members. However, the UWG through their advisers has been unwilling to meet or engage with it.

"There are tender application forms Pison has received from eligible creditors with a quantum of eligible debt larger than some members of the UWG. These eligible creditors must have considered the terms of the invitation memorandum and found the terms acceptable and Pison, credible," it said.

"More than 150 other eligible creditors who have submitted tender applications must have also considered the terms of the invitation memorandum acceptable. We are therefore puzzled by the stance taken by the UWG's creditors and their refusal to even engage with Pison."

Pison has to determine which of the submitted tenders to accept by 5pm on Sept 25. It said that it is reviewing the submissions and will give an update on the outcome in due course.

It added that once it has completed the purchase of a "significant portion" of the eligible debt, it will turn its attention to the holders of the perpetual capital securities and preference shares (P&P holders).

"We remain committed to facilitate, on an expedited basis, a debt restructuring exercise that is fair and equitable to the P&P holders, Hyflux's shareholders and other stakeholders. We are intent on and keen to progress the invitation memorandum to completion, actively engage with the UWG members and deal with the P&P holders through the Securities Investors Association (Singapore) and its advisors over the course of the next few weeks," it said.

"Pison is aware of the tight timelines and the pressure on the Hyflux group to undertake and complete its debt restructuring exercise, and Pison has made concerted efforts and taken active steps to facilitate the progress and success of the invitation memorandum.

"Our position has not changed. We continue to be interested in investing in the Hyflux group. We, together with our advisors, have been working tirelessly on this matter and Pison has incurred much time and costs to date. We believe Pison's invitation memorandum presents a viable plan for the restructuring of the Hyflux group. Our hope is that if Pison is successful in completing the invitation memorandum and dealing with the UWG, the P&P holders and Hyflux's shareholders, Hyflux, an iconic company in our view, together with the help of Pison, can be rescued and once again flourish."

Pison is to make payment for the accepted bids on the settlement date of Oct 23, 2020. The long-stop date on the deal is Dec 31, 2020.

Hyflux said it will make the appropriate announcements when there are further material developments on the matter.

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