Sias objects to potential rescue offers for Hyflux that exclude PnPs

Singapore

THE Securities Investors Association (Singapore), or Sias, asserted that it will not support any plan to rescue Hyflux that lacks a "concrete proposal" to resolve the debts due to holders of the embattled firm's perpetual and preference shares (PnPs).

In a press statement issued on Sunday, Sias chief David Gerald flagged that the potential new white knights for Hyflux that have surfaced in the past few weeks have not made any offers yet for Hyflux's 34,000-odd retail PnP holders, who are owed some S$900 million in total.

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 9, Hyflux received a letter of interest from Unilegend Investments, a Singapore investment holding company, with an unnamed client interested in investing in Hyflux.

That same day, Indonesian businessman 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. 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. On that day, the High Court will hear the applications by an unsecured working group of banks and by ESR Reit to be carved out of Hyflux's moratorium. If successful, the banks plan to apply for judicial managers to be appointed to oversee Hyflux.

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

Separately, he 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 holders, 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", Mr Gerald added.

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, he 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."

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 offer, or whether it will give up its 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.

Sias also queried Hyflux on whether it has accepted Utico's revised offer, and requested Hyflux 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)."

Hyflux's debt moratorium is currently in place till July 30.