Showing posts with label hyflux. Show all posts
Showing posts with label hyflux. Show all posts

Monday, November 21, 2022

Possible Next Steps for Hyflux Investors

I am not a lawyer and neither do i have any experience in litigation. After reading the news about the charges filed against the CEO, CFOs and directors for various disclosure-related issues like omissions in the 2011 offer information statement and non compliance with accounting standards, it brought me back to the time when i read the following portions of the Securities and Futures Act (SFA).

Civil liability for false or misleading statements
254.—(1)  Where an offer of securities or securities‑based derivatives contracts is made in or accompanied by a prospectus or profile statement, or, in the case of an offer referred to in section 280, where a prospectus or profile statement is prepared and issued in relation to the offer, and —
(a)a false or misleading statement is contained in —
(i)the prospectus or the profile statement; or
(ii)any application form for the securities or securities‑based derivatives contracts;
(b)there is an omission to state any information required to be included in the prospectus under section 243 or there is an omission to state any information required to be included in the profile statement under section 246, as the case may be; or
(c)there is an omission to state a new circumstance that —
(i)has arisen since the prospectus or the profile statement was lodged with the Authority; and
(ii)would have been required by section 243 to be included in the prospectus, or required to be included in the profile statement under section 246 (as the case may be) if it had arisen before the prospectus or the profile statement was lodged with the Authority,
the persons referred to in subsection (3) are liable to compensate any person who suffers loss or damage as a result of the false or misleading statement in or omission from the prospectus or the profile statement, even if such persons, unless otherwise specified, were not involved in the making of the false or misleading statement or the omission.
[4/2017]
(2)  For the purposes of subsection (1), a false or misleading statement about a future matter (including the doing of, or the refusal to do, an act) is taken to have been made if a person makes the statement without having reasonable grounds for making the statement.
(3)  The persons liable are —
(a)the person making the offer;
(b)where the person making the offer is an entity —
(i)each director or equivalent person of the entity; and
(ii)if the entity is also the issuer, each person who is, and who has consented to be, named in the prospectus or profile statement as a proposed director or an equivalent person of the entity;
(c)where the issuer is controlled by the person making the offer, one or more of the related parties of the person making the offer, or the person making the offer and one or more of that person’s related parties —
(i)the issuer;
(ii)each director or equivalent person of the issuer; and
(iii)each person who is, and who has consented to be, named in the prospectus or the profile statement as a proposed director or an equivalent person of the issuer;
(d)an issue manager to the offer of the securities or securities‑based derivatives contracts who is, and who has consented to be, named in the prospectus or the profile statement;
(da)an underwriter (but not a sub‑underwriter) to the issue or sale of the securities or securities‑based derivatives contracts who is, and who has consented to be, named in the prospectus or the profile statement;
(e)a person named in the prospectus or the profile statement with the person’s consent as having made a statement —
(i)that is included in the prospectus or the profile statement; or
(ii)on which a statement made in the prospectus or the profile statement is based,
but only in respect of the inclusion of that statement; and
(f)any other person who made the false or misleading statement or omitted to state the information or circumstance (as the case may be) but only in respect of the inclusion of the statement or the omission to state the information or circumstance.


From a laymans point of view just based on reading superficially the passage above, it does look like some investors do have a recourse in their investments. Certainly best to consult a lawyer to know the details better.

However, a lawyer is very very expensive for the ordinary investor in Singapore due to lack of support from the TOP, like litigation funding, contingency fees or just plain educating and informing the general public on their legal rights and recourse for matters related to investments. 

To be clear, i am not refering to pro bono, small claims tribunal e.t.c which is for the segment of the population who can't afford to invest normally , relating more to criminal law. and for small sums like below $10k.  

I am refering to the lack of support and recourse to civil law matters and the middle class Singaporeans who are neither too poor or too rich to afford legal services without the affordances of litigation funding and  contingency fees.

Anyway, there seems there is a group of very ordinary middle class Singaporeans trying to solve this problem on their own. 

https://governanceforstakeholders.com/2022/11/17/re-posting-a-message-on-behalf-of-a-group-of-hyflux-preference-shareholders-and-perpetual-securities-holders/




Saturday, February 2, 2019

Another bomb to the retail investors of 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.

FILE YOUR PROOF OF CLAIM HERE


"Any party who is required to and does not file their proof of claim by 5.00pm on Friday, 15 February 2019 will (subject to the Proposed Chairman’s discretion) not be entitled to vote at the Scheme Meeting(s), and may not be entitled to any payments or distributions made pursuant to the compromise or arrangement that will be voted upon at the Scheme Meeting(s). In such event, all their claims against the Scheme Companies as well as all obligations the Scheme Companies have towards them will be forever varied, waived, released, discharged and/or extinguished in accordance with the terms of the said compromise or arrangement." - from Hyflux Announcement on 1 Feb 2019.

15 calendar days to file proof of claim. 

It is extremely ridiculous to expect retail investors, whom many are retirees, to meet the timeline. Especially so, when a major holiday is upon us. While i think it is stated that those whose preference or perpetual securities are custodised with CDP do not need to file proof of claim, many have their shares custodised with CPF agent banks and nominee banks like Standard Chartered Bank. It seems these investors have to get their banks to file for them or else these investors 1) won't be allowed to vote and 2) have their claims forever extinguished. I wonder how accountable such banks will be if they didn't file for their customers. I guess nothing will happen, since there is little accountability in Singapore anyway, investors are passive and selfish to stand up for one another and banks should likely have those legal jargon that protects them from any accountability.

OCBC released a report  and below is an image from them.  Investors of Hyflux are awaiting the Salim restructuring proposal that has an indicative date of mid february 2019 to be released.
Creditors , perpertual and preference shareholders will then get to vote. It seems that if more than 75% in value  vote in favour of  the proposal terms, the Court is able to force the proposal terms on the rest who did not vote in favour. This is subjected to the following conditions. More than 50% of the voters who are present have to vote in favour AND the terms have to be fair and equitable to the dissenting class. What is considered fair and equitable i'm not sure ...do you know?


My Thoughts

The number of people present to vote is important, since both the value of shareholdings AND the number of hands are taken into account.
Given a tight 15 calendar days timeline and the Chinese New Year, is it reasonable to think that many people may miss the deadline, resulting in a low turnout?
Wouldn't it mean that the percentage of Olivia and board of directors' supporters present to vote will be higher?
And if their percentage is higher in terms of value and numbers of hands, wouldn't the proposal likely go through?
Does this seem fair or equitable?
Is this a ploy or is it not?
Is such a short timeline an industry practice? ( i vaguely recalled Ezra gave about 1.5 months for creditors to file proof of claim)
Where are the regulators? Who are looking out for the retail investors in Singapore?
Something is really wrong with my country.
Where is the accountability?

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) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux
25)Where to find money to pay back retail investors? 
26)What happened at Hyflux's Second Townhall Meeting

Saturday, January 19, 2019

What happened at Hyflux's Second Townhall Meeting.

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.



" My company today is unlike other restructuring..the founder is still in the driver seat in those companies. They still own substantial shares, so they will still want to continue running the company . Whereas in this case, when the Salim Medco come in , they are only willing to take a 60% . So when they are taking over 60 % , i lost control and i also volunteer not to take up any management shares, so practically im not in the drivers seat anymore...........if you are so happy to see that i take some paycut, i will but i will only take the paycut and donate away because i think its right and i will not pump back to company because that will only benefit the new shareholders" - Olivia Lum

"I dont have a deep pocket and all along i have been too ambitious but the irony is there are so many projects that are built around the world but it is the project in singapore that caused the downfall of singapore. We didnt predict it. But during that time when we took it, it was not a single person decision. The PUB has to approve it, all the independent engineers and advisors have to say yes and the banks have to approve it as well before we can even get involved in this project. So during that time, everybody was singing praises about it. It was the most excellent and most sustainable way. Otherwise knowing Singapore,  nobody would stake out their necks and award something that is unsustainable in Singapore but something happened along the way and i dont want to mention it all over again . It was the situation about the electricity in Singapore and we are one of the victims. Other companies are also losing money but we are small." - Olivia Lum

So the above pretty sums up the state of the Company. No proposals were shown during the townhall except for informing that in the case of liquidation, perpetual and preference share holders will get 0% as they are ranked behind the banks and bondholders. From my gut feeling based on the replies, i think that it is very likely that the perps and preference shares will be converted to ordinary shares, perhaps with a token cash payment. The proposal should be out in mid-feb. 

My Thoughts

1)Salim wants to take the company debt free and they want Tuaspring. It seems most likely that they want everyone to be converted to ordinary shares in the end. The funny thing is ,Perpetual and preference shares are not debt. There is no redemption date for perps and preferences shares and they are classified as equities. The better alternative would be to stay on as perps and preference share, perhaps lower the coupon rate, instead of converting all into ordinary shares. But, it seems this is not the intention from my gut feel.

2)Maybank as a secured creditor seems to have the upper hand among all the different creditors. It is funny why they have such a privilege because, though secured, they have no other recourse since it is secured to Tuaspring only. This means that if Tuaspring is sold at say $400 million, while the maybank loan is about $500 million, Maybank only can recover $400 million. Maybank would not be able to go after other assets of Hyflux. 
From this train of thought, i still think Sembcorps low ball deal for Tuaspring only was better than Salim's offer for the whole Hyflux.
If it was the contingent liabilities that would be payable upon a change of Tuaspring ownership or liquidation that Hyflux is so afraid off, then i wonder why the offtaker(PUB) is not understanding enough to know that there are many Singaporean fathers, mummies, retirees who are affected by this, and so waive off such contingent liabilities. 
It may be such contingent liabilities that could be imposed by the offtaker (PUB) that could hit Hyflux at the group level that Maybank is leveraging on.It's really ironic if you ask me. 



3) Further to point 2, Olivia revealed that when they got into trouble, straightaway they approached PUB and NEA because Hyflux was doing projects for them. She also commented that there is no ministry that look after restructured companies, so i think i can't speak on behalf of the government, she said. I find it really ironic. Now, in my mind, is it a situation, again where Maybank is leveraging on the terms of the contract between Hyflux and PUB and NEA to hit Hyflux at the group level through contingent liabilities? SIAs Gerard continued with" Last time i told you to talk to your MP".

4)Why did Hyflux issue perpetual issues in May 2016 when the management know Hyflux is in Serious trouble? Why did the companies not issue rights but instead issue the perpetual securities in 2016?
Hyflux issued the perpetual securities in May 2016. That was after winning a big project in Egypt that was worth $500 million. At that point in time, Hyflux was still very profitable, we were just starting out the power operations, so it wasnt apparent at that point in time that it would reach to this extent. So at that time when we issued the perpetual securities, the prospect of repaying the perpertual securities was still very good. Why we did not raise any rights issues at that point? The market cap at that point was roughly only about $800 million, so raising $500 million in rights was not viable. - Hyflux CFO own words.

Firstly, i think she may have gotten her facts wrong as the highest market cap was about $550million ( $0.604 -Mar 11 2016) or $380 million ($0.447 - Jan 27 2016). NOT roughly $800 million. A difference of about $250 million to $420 million is a lot.  



5)"As a company, the book value of our assets are evaluated for impairment on a regularly basis and we have been doing that , so even if the 2017 results that we released in February 2018, the book value for all the assets were also assessed for impairment, so at that time, we were actually talking to several interested parties for the purchase of the Tuaspring plant and the numbers that were being spoken about at that time was pretty much close to the book value. The most recent exercise was under very different circumstances so its not a fair comparison  to compare the exercise with the one that we had last year." - Hyflux CFO

This statement is very very troubling. If the negotiations were around the book value of $1.3 billion before the VOLUNTARY filing of the court protection. Did the Board of Directors just caused investors a massive loss in their investment by VOLUNTARILY filing the protection? In my mind, it seems that companies were low balling Tuaspring or Hyflux after the court protection such that it is stated that the offered prices aren't even enough to cover Tuaspring Maybank loan of $500 million. 
A loss of about $800 million or more in value ( $1.3 billion to $500 million)!

Did the advisors advise wrongly and the BOD made the wrong decision to go for court protection, VOLUNTARILY?
Yes, maybe there could possibly be some expectation of incoming lawsuits, but if that is the case, couldn't they fight the lawsuit and when lost, then file for court protection? This would have given some more time for the purported time needed to sell Tuaspring before everyone in the whole world knows how dire the state Hyflux is in and start lowballing.



My intentions

Sias Geraid mention that " something is better than nothing". While that is of course is true, i think it depends on the context. 

I have a large stake in Hyflux perps and i will only accept a reduction in coupon while my perpertuals continue under the same terms and remain on the books. This is the minimum i expect. 
If this minimum is not met, i would choose to liquidate and lose it all. 

Simply put, being given Hyflux shares is not enough. It would take years ( if possible) to reach back my capital and judging from the number of retirees at the Townhall, honestly, they don't have that many years left on this earth also. 
By allowing all our perps and prefs to convert to ordinary shares, the real winner is Salim Group ( indonesions) and Maybank (Malaysians). Why would i want that?
The other winners of course are those high level people who have been singing praises of Hyflux and using Hyflux as the banner of entrepreneurship, using Hyflux for their environmental ambitions and using Hyflux as a way to secure our water supply at really very very cheap rates when Hyflux bidded for the Tuaspring project.
Olivia Lum is also the winner in the sense that her legacy lives on!

Since the court protection has been done( which shouldn't have been done so fast at least in my opinion) and the value of Tuaspring has been reduced such that the Maybank loan cannot be covered by a sale.
What can be done going forward? 
If Hyflux is so afraid of the contingent liabilities that will hit Hyflux at the group level if Tuaspring was liquidated by Maybank, why can't these contingent liabilities that will hit Hyflux at the group level  be waived by the offtaker (PUB), reducing the leverage that Maybank has. After that, then sell Tuaspring at whatever price as it isn't important now, Maybank will take the hit. Banks then extend credit lines to complete the Tuasone project and the Tuasone offtaker also waive off the contingent liabilities ( late completion penalties etc). ..but no..this will not happen.
Instead what has happened?
Salim ( the Indonesians) has to come into the picture to pump in just enough money to complete Tuasone because the banks wont help, and because the offtakers won't help. How ironic! The real, affected losers are the Singaporean fathers, mummies and retirees who again ironically, are not the ones demanding their money back right now since theirs are perpetuals/preference shares with no redemption dates!

Don't worry, PUB is still able to take over Tuaspring and charge some contingent liabilities as per the picture above, so our Water will still be safe.

This is my choice.
Enjoy your weekend!

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) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux
25)Where to find money to pay back retail investors? 

Saturday, January 5, 2019

Where to find the money to pay back 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.

If you are still unaware, a telegram group consisting of Hyflux retail investors has been set up to facilitate communication. One can sense the frustration of retail investors from the messages posted. Every now and then, there are people who would offer good insights into what is happening. With such a long wait for the outcome and lack of concrete updates from the investor relations, it is little wonder that speculations are rife. Some even commented that since Hyflux doesn't seem to have much money, is it possible to claim from the professional indemnity insurance of the board of directors, advisors, e.t.c.

I received some questions from an anonymous member of the telegram group which i thought is good to share. These questions can be asked in the upcoming Townhall meeting on 18 January (Friday) and no, i did not email the Hyflux investor relations nor SIAs about these questions.

Question 1
Reference to your FAQ on your website, it was mentioned there was no default, no legal demand and that the filing was voluntary to proactive protect all stakeholders. If this was what your external advisors advised, should the outcome of this exercise result in significant cut or total wipe out of pref and perp value as compared to the last traded price, will management and BOD be willing to support stakeholders in making claims against your advisors since you have probably been misled into thinking that this is the best course of action? It is like you having a flu with slight fever of 37.2, your doctor prescribes a very strong antibiotic and after taking, you have an allergy reaction and went into coma. Wouldn’t the doctor be negligence since the risks probably outweigh the benefits?
Relevant article
https://www.hyflux.com/financial-reorganisation-exercise/shareholders-and-holders-of-securities/

Question 2
As per Singapore Standard of Auditing (SSA) 570 pertaining to going concern, auditor is supposed to assess company’s forecast over the next 12 months for the continual use of going concern assumption. With the company entering into a scheme within 5 months from the last financial year end date and 2 months from the audit report signed off date, what is the current status for the 2017 audit report. Is auditor affirming to their 2017 report or have the report been withdrawn? (Personal note, no need to ask HF – Shouldn’t ACRA, the regulator governing auditors start an audit on KPMG’s working paper too?)
Relevant article
https://isca.org.sg/media/777078/ssa-570-revised-july-2015.pdf

Question 3
In the first town hall meeting, it was mentioned that water contributes only 10% of TS revenue (Summary of the meeting at below link). Page 138 of the 2017 annual report, under discontinued operation put TS external revenue at S$174m. So, it is right to assume revenue from water is only S$17m in 2017?
Relevant article
https://secure.fundsupermart.com/fsm/article/view/14296/six-takeaways-from-hyflux-s-first-round-of-townhall-meetings

Question 4
According to announcement dated 11 April 2011, first year selling price per cubic of water to PUB was set at S$0.45. In view of this, should TS be making at least 0.45 x 318,500 x 365 days = S$52m from water sales annually?
Relevant article
http://investors.hyflux.com/newsroom/20110406_123709_600_40E33ED3154E853A4825786A00141CB4.1.pdf

Question 5
When is the date whereby TuasOne faces liquidated damage from delays in commencing operation and how much will the liquidated damages be?

Question 6
Noted that TuasOne has a 25 years deal with NEA, can you reveal the daily contracted incineration capacity? Do you have a committed 3600 tonnes per day from NEA? If not, what is the tonnage committed and for how long?

Question 7
Have the company done an impact assessment on the future incineration demand given the following factors?
- NEA reported daily solid waste at around 8443 tonnes a day and with the new TuasOne, a total of 3600 tonnes per day capacity will be added to the whole of Singapore. 
- Sometime around 2025, a new integrated waste management facility will come online in Tuas with incineration capacity of 5800 tonnes per day. And
- Singapore is targeting a recycling rate of 70% by 2030 and what if this target is overshoot
How does the above impact TuasOne in securing enough waste for running the WTE plant at high capacity level?
Relevant articles 
https://www.nea.gov.sg/our-services/waste-management/overview
https://www.straitstimes.com/singapore/environment/2-green-plants-to-improve-waste-treatment-efficiency
https://www.mewr.gov.sg/ssb/our-targets/resource-sustainability/domestic-recycling-rate

Question 8
During 2011, why HF did not enter into vesting contracts with the government and locked in the electricity selling price whereas most of the additional capacity are thought to have been build basis on LNG vesting contract? 
Relevant article 
http://singaporepowerdesk.com/loss-making-power-generation-sector-in-singapore-requires-bold-steps/

Question 9
What is the value of the power generation assets in Tuaspring? Alternatively, are you able to reveal the total price paid to Siemens? Back in 2011, industry sources have been quoting a figure of around US$500m for the power portion. 
Relevant article
https://www.eco-business.com/news/hyflux-in-talks-over-tuaspring-power-plant/

Question 10
With 90% of TS revenue coming from power generation, does entry into power generation constitute major transaction which require shareholders’ approval? Did the company obtained shareholders’ approval prior, and If not, why is it so? 

Under SGX Practice Note 10.1, 3.2.2 states that “However, should the acquisition change the risk profile of the issuer, shareholders should have an opportunity to have their say on the proposed acquisition. This is so notwithstanding that the acquisition will not change the main business of the issuer. Acquisition of the power turbine from Siemens forms a substantial part of the group assets and will change the risk profile of the group as exhibited by the current dire situation largely caused by exposure to the electricity market. 
http://rulebook.sgx.com/en/display/display.html?rbid=3271&element_id=5634&print=1

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) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux

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

Saturday, October 20, 2018

My layman views on so called " white knights" of 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.
Overview
To summarise the major developments that rocked the world of only Hyflux stakeholders recently:

 1) News mentioning that Hyflux received only one final bid for Tuaspring by a local company, Sembcorp which is not even enough to pay back the loan by Maybank. Since the loan by Maybank is in the range of $500 - $600, we know the upper bound of the bid. Many stakeholders are rightfully disappointed or angry that the market price of the bid is so low and naturally attributed this to non-market forces . The hindrance of PUB which only approved 2 local companies. 

2) The most recent news that an Indonesian consortium led by Salim and Medco group are interested in Hyflux. 
In short, with conditions being fulfilled,  they would pump in $400 million to own 60%  of Hyflux, shareholder's loan $130 million to Hyflux and before completion of the deal ,loan of $30 million as working capital rescue financing.


One of the conditions before the $400 million and $130  million pumped in is that there will be a full and final settlement of  notably the MTNs, Perps ( BTWZ) and the Pref (N2H). It was also mentioned in the picture above under point 4.2 that " a proportion of new shares would be issued to certain creditors"



My layman view

1)Is this Indonesian consortium deal better off than Sembcorps bid of only Tuaspring which is below Maybank's outstanding loan as stated in the media? The exact amount of Sembcorp's bid is not revealed publicly. However, a good guesstimate could be gleaned from a CIMB report on 30 Aug 2018.


Hyflux's outstanding loan to Maybank as of End-June 2018 = SGD$658.6 million
Maybank's loan provisioning = SGD$106.3 million
Guesstimate of Sembcorp's bid = SGD$552.3 million

If 60% gets $400 million of Hyflux based on the consortium's offer, 100% of Hyflux will be $667 million. 

If Tuaspring is bidded for $552.3  million by Sembcorp ( this amount is just speculation ) which if we use as a guage for it's market value, wouldn't it mean the Indonesian consortium valued the rest of Hyflux's assets ( Tianjing Dagang, Qurayat, Tuasone, Associated and JVs) at $667 - $552=$115 million?

2) Let's see from the position of MTNs, Perps (BTWZ) and Pref(N2H). 

If Tuaspring is sold to Sembcorp and the money is paid back to Maybank and no further claims from Maybank. Hyflux's noose is gone and Hyflux should return to some profitability, possibly slowly returning the debts to its creditors. At least there is no known " full and final settlement" condition set.

However, if it is based on the Indonesian consortium's bid, and with the "full and final settlement" condition, it seems to me that if we would take the $400+$130-$30 = $500 million proceeds earmarked( worse case scenario, assuming no further top-ups from financing, further rights) that is going to be shared with the various creditors, it would be a massive, massive capital loss .  The point 4.2, "proportion of new shares given to certain creditors" isn't going to be much also, since the new shares will be a proportion of the 40% of Hyflux, which amounts to $267 million market price based on the Indonesian consortium's bid.

So from my layman point of view, without further details and based on just assuming $500 million is all there is to be shared among the creditors plus some shares, out of the 40%, thrown in, i think it sucks.

3) How about from the position of the BOD ?

It would be far harder to keep Hyflux going if Sembcorp's bid ( based on only on news) is accepted instead of the Indonesian's bid.  
Remaining in control is not valuable if the business environment is hard( considering a large bulk is in Middle East ) and needing to pay back the remaining MTNs, Prefs and perps. If Hyflux fails, salary is gone, shares is completely worthless. To pull through, BOD needs to work harder to get business. 

It would be so much easier to accept the Indonesian consortium's offer, even at the expense of losing control. Indonesian can be the new market for Hyflux and that market is huge. With the consortium's backing and connections, the sky is the limit. I mean i would rather be a small fish in a big pond than a big fish in a small pond. Besides, i get to get my salary and my shares should recover, given such strong partners AND the balance sheet is wiped clean. And i would be given some Management Retention Shares some more.

Conclusion

Of course it is a happy day for certain people. But it isn't a happy day for the many others who invested their retirement funds, child education funds or CPF.  A flu really trivializes the issue here and it is not a cold to many of us. It is years of toil, sweat and hardwork to earn those money that we placed into Hyflux. What about the statement :" I am still young and i will work hard for you" said during the Townhall? Is this, the easy way out, leaving the unsophisticated, helpless ones behind?

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