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Sias objects to Hyflux’s potential rescue offers that exclude PnPs

THE Securities Investors Association (Singapore), or Sias, does not support any potential rescue deals for Hyflux that lack a “concrete proposal” to resolve the debts due to holders of the embattled firm’s perpetual and preference shares (PnPs). 

In a press statement on Sunday, Sias chief David Gerald flagged that potential new white knights for Hyflux that have surfaced in the past few weeks have not made any offers yet for PnP holders. 

Mr Gerald also raised separate concerns over Utico’s latest S$485 million cash and stock offer for Hyflux, which is currently the only offer on the table for PnP holders. 

On July 10, Hyflux received a letter of interest from Unilegend Investments, a Singapore investment holding company, with an unnamed client interested to invest in Hyflux. A day earlier, Indonesian magnate Johnny Widjaja made a formal cash offer for the debt of Hyflux’s bank lenders, noteholders and other senior unsecured creditors through his vehicle, Pison Investments.

Previously, another potential white knight, Aqua Munda had made an offer to the senior unsecured creditors, while two other firms, Longview International Holdings and FCC Aqualia, had expressed interest in investing in Hyflux.

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All of these potential investors have not made offers to the PnP holders, Mr Gerald noted. 

Aqua Munda had previously told Sias that it will make an offer to PnP holders at the appropriate juncture, but Sias has not received the terms of any such offer to date. Mr Gerald urged Aqua Munda to table an offer to PnP holders before July 27. 

Mr Gerald also noted that while Pison’s offer is backed up by S$200 million in PT Bank Mandiri, the firm has also not extended any offer to the PnP holders yet.

“In order to continue to help PnP holders to achieve the best possible outcome in this restructuring, Sias is willing to engage and meet with the representatives of any potential investor with concrete proposals for the PnP holders and will, where appropriate, provide relevant updates,” he said. 

Separately, Mr Gerald raised concerns over Utico’s revised rescue offer to Hyflux. For one thing, he noted that neither Utico nor Hyflux has made the detailed terms of the revised offer public to PnP holders, and urged them to do so “on a timely basis”. 

In addition, based on publicly available information, it appears that PnP holders will no longer be able to choose between an upfront and a deferred payment option, Mr Gerald said. 

Instead, it appears that those classified as “small” PnP holder, holding less than S$10,000 worth of PnPs, are forced to take the upfront payment option. Meanwhile, “large” PnP holders, or those whose PnP holdings are S$10,000 or more, have to take a stock-only option. 

The S$10,000 threshold is arbitrary and “may be prejudicial to the large PnP holders who would be forced to take the shares of Utico and Hyflux without knowing the true value of these shares and without any certainty that the relevant Utico entity would successfully achieve listing status on a recognised stock exchange”, he added. 

Thirdly, there has also been a lack of detailed information to help PnP holders assess the share component of Utico’s offer, such as a formal valuation of the shares to be issued to them, Mr Gerald said. 

“Given that the revised Utico offer now contemplates a mandatory shares option for all large PnP holders, it is even more critical that due diligence rights be given to Sias and its advisers,” he said. 

Without this information, Sias cannot comment on whether Utico will be able to pay if large PnP holders exercise the put option which is proposed to be granted to them, he added. 

Hyflux’s board has also not stated if it will abstain from voting on the revised Utico, or whether they will give up their entitlement in benefit of PnP holders, despite repeated Sias queries, Mr Gerald said. 

Furthermore, it is unclear if there will be a release of claims against Hyflux directors under the revised Utico offer. Sias had previously conveyed PnP holders’ feedback that there should be no release of claims even if PnP holders vote in favour of Utico’s new deal. 

Sias also queried Hyflux on whether it has accepted Utico’s revised offer, and requested the company to provide the identities of the principals behind its potential investors. 

Mr Gerald said: “Sias reassures PnP holders that it continues to work with the relevant stakeholders to obtain clarity on the revised Utico offer and to assist the PnP holders to make an informed decision on whether to accept the (offer).”

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