Tuesday, December 25, 2018

The Unsecured Working Group (UWG) are against the retail investors - Hyflux

Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.

Based on the 15 Nov affidavit, the Unsecured Working Group ( UWG) consisting of 5 banks and representatives of the Medium Note Holders ( those who bought the wholesale bonds at 250k minimum), collectively known as accredited investors proposed the following for the perpetual securities and preference shares holders ( retail investors):

In addition to the above, there were other statements in the affidavit meant to put retail investors at a distinct disadvantage in receiving any recovery rom their investment .

Below are some quotes from the same affidavit.

My thoughts

It is like the rich vs the poor.
Not too long ago in 2016, the proceeds of the $500 million pumped in by retail investors ( perpetual securities)  was used materially for the repayment of accredited investors of a total $275 million as stated in the Offer Information Statement.   And accredited investors are now trying to maximise their recovery at the expense of the retail investors.
A classic example of why the rich-poor divide keeps widening. The retail investors are really the carrot heads here.

To add injury to the insult, i will like to highlight what i deem to be wrong about the Offer Information statement for the perpetual securities in 2016. Whether it is against the law or any regulation, i am not sure. But morally, to me , it is wrong.

In Feb 2015, Hyflux had a consent solicitation exercise with accredited investors. This is published in their investors relations website. The purpose is to:

Now, take this into context with an article  published on Nov 2016 showing the various consent solicitation exercises undertaken by local listed companies before and where these companies are now at. Among the companies that have undergone consent solicitation are Rickmers marine, marco polo, Nam Cheong, Ausgroup..... It seems consent solicitation exercises are mostly negative.
Why would a company need to undergo a consent solicitation exercise to amend the terms of the original bond or security if nothing is wrong or nothing is going to be forseeably wrong in the future?

This consent solicitation exercise doesn't seem to be stated in the Offer Solicitation Statement for the perpetual securities.

So the question is:

Is the consent solicitation exercise a material disclosure in the Offer Information Statement ( Perpetual Securities) to the retail investors since it generally is a forewarning of danger? 

Let's see where Hyflux could have inserted this disclosure. I don't think Feb 2015 is too long ago to be immaterial as underlined below, last 3 years seemed to be relevant.

Or Hyflux could have inserted it anywhere it deemed fit to cover themselves actually.
To me, a highlight of the consent solicitation, written in simple english preferably and the reason for such an exercise, without which, what will foreseeably happen should be disclosed.
As one can see from the timeline of the part 3 years, only the good or general stuff is shown.

So long story short,
Consolicitation Exercise done with accredited investors

Funds ( whose beneficiaries are materially the accredited investors) raised from Retail investors who are not informed of this consolicitation exercise through the offer information statement (OIS)

Funds used to repay accredited investors

Accredited investors now trying to maximise their recovery at the expense of the retail investors.

Further reading
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance
6)A happy ending for retail perpertual securities holders - Tiger Air and Hyflux
7) The Very Curious Case of Sharebuybacks- Hyflux
8)What did the founder/Chairwoman/CEO do to help hyflux throughout the years
9) Moving forwards at the Townhall meetings with Hyflux - Part 1
10) Moving forward at the Townhall meeting with Hyflux - Part 2
11)The Lucky Accredited Investors of Hyflux's Perpetual Securities - Part 3
12) The Peculiar Case of HyfluxShop - Question 12 
13)Uncovering the Real Motivations Behind the HyfluxShop 
14) High Level Staff Movement Indication of Red Flags -Hyflux
15)An industry comparison of Hyflux compared with its peers - Question 15
16)What other Water Companies did that Hyflux didn't - Question 16
17)Why a debt to equity option for retail investors is not right
18) Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux
19)Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux- continued
20)Informal Steering Committee for the Reorganisation Process - Hyflux
21) What happened to other Debt Restructuring Exercises - Ausgroup
22)What happened to other Debt Restructuring Exercises - Nam Cheong
23) The so-called "white knights" of Hyflux

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