Hyflux's perpetual security holders get back only 10% of investment in restructure

Goola Warden

SINGAPORE (Feb 17): Hyflux has announced a tentative restructuring plan which has still to be voted on in a scheme of arrangement by perpetual security holders, preference shareholders, and unsecured creditors which comprise medium term noteholders, banks and trade creditors.

Eventually, equity holders will also have to vote in favour in a separate extraordinary general meeting.

Tentative date for the scheme meeting is Apr 5 and all the conditions for Salim Group’s cash infusion must be met by Apr 16.

Since debt will be exchanged for equity, current ordinary shareholders will be diluted, and noteholders and holders of the preference shares and perpetual securities will receive equity.

The noteholders’ total claims are $271 million; total claims by unsecured creditors most of which are the banks amount to $1.672 billion. A big portion are contingent liabilities. For every $1,000, noteholders will receive $107.63 worth of Hyflux shares and $138.72 in cash, totalling $246.35. In other words, noteholders will get back 24.6 cents for evey dollar invested.

The ratios for preference shareholders and perpetual security holders, the so-called PnP, are worse. The $900 million worth of PnP will be sharing $27 million. Hence for every $1,000 the PnP holder will receive just $30.15 in cash, and $76.39 in Hyflux shares, or 10.7 cents for every $1 invested. The current ordinary shareholders will hold the remaining 2.74% of reconstituted Hyflux (see table).

Not enough money to go round

Parties

Shares in reorganised Hyflux

Total Cash Distribution

Salim Group and Medco Group

60%

Cash infusion

Ordinary shareholders

2.74%

 

Unsecured scheme parties comprising of banks, noteholders and trade creditors

27%

$232 million

Preference shareholders and perpetual security holders

10.26%

$27 million

Trade Creditors of Hydrochem, Hyflux Engineering and Hyflux Membrane Manufacturing

-

$13 million

Source: Hyflux

The legal representatives of the company stressed during a hastily called media briefing on Feb 17 that the alternative to the restructuring would be liquidation in which the PnP would get nothing.

However, in the event of Hyflux's liquidation, PUB may terminate the water purchase agreement with Tuaspring, and exercise its step-in rights to take over the Tuaspring.

“In that event, Hyflux would have little to no value to extract from [Tuaspring]. The Scheme Parties that only hold claims against Hyflux, in particular, the holders of the Preference Share Claims and the Preference Capital Securities, are unlikely to have any recovery,” Hyflux states in its affidavit.

REIT impact

Meanwhile, Hyflux has been cutting costs including the right-sizing of premises leased at Hyflux Innovation Centre owned by Ascendas Real Estate Investment Trust. “The Hyflux Group continues to hold discussions over the lease in respect of Hyflux Innovation Centre, with a view to concluding a revised lease agreement with the landlord, which will allow Hyflux to surrender some of the units it presently occupies in Hyflux Innovation Centre,” Hyflux says.

Similarly, Hyflux is in discussions with its landlord for its manufacturing and warehousing premises at 8 Tuas South Lane, also with a view to right-size the space leased and to reduce the overhead expenses going forward. This property is owned by ESR-REIT.

See also: Hyflux CEO to contribute entire stake to restructuring plan; ordinary shareholders to get 2.74% of total shares