Saturday, March 9, 2019

Why I Am Still Voting No To The Revised Offer - 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.

On 8 March 2019, a revised offer to the retail perpetual and preference (PnP) holders was out. Read here. Straits Times wrote that the PnP holders are now able to get up to 7.4% in cash, meaning this 7.4% is not guaranteed and it is the best case scenario and the recovery may be lower than this. I am not sure how Straits Times calculated it but my calculation instead was up to 6.2% in cash, making the recovery for PnP 13.8% in cash and shares in the best case scenario.

Previous: Every $100 invested, get back $3 cash and $7.6 in implied share value ($10.60)   
Now: Every $100 invested, get back up to $6.20 cash and $7.60 in implied share value ($13.80)

Why I Am Still Voting NO
  • Salim Group did not improve their offer in any way. The little pie is still the same and it is simply redistributed for the creditors and PnP holders to fight among themselves for the scraps. If one looks at the latest valuation of Hyflux post restructuring, based on the 1 March court affidavits. With the various creditors and PnP claims extinguished, the net asset value of Hyflux would be $1.1 billion. This means that Salim Group bought a company worth $1.1 billion at a price of $667 million in implied value. This means  Salim Group will have a  gain of 66% in implied value ( 444/667 multiply by 100%) post restructuring. It must be further noted that this $1.1 billion valuation is done during court moratorium, a distressed period and i would GUESS that the subjective assumptions or judgments used by the valuers would be very stringent such that $1.1 billion is a very conservative figure.


  • The retail perpetual shareholder invested $500 million in May 2016 and in May 2018, this $500 million is gone. Just like that, within two years. If Hyflux is liquidated, it would be easier to check the books of the company to see if there was any foul play. I was told that the Board of Directors and Olivia Lum would no longer have as much resources to defend themselves in such an instance. It seems also that third-party funding in insolvency proceedings is already allowed in Singapore and if Hyflux is liquidated, this could be an option. Source here. I am still finding out more on how this works and whether it is similar to the USA where lawyers don't charge a fee but will get a percentage of any proceeds that is won. Of course, the proceeds are from the director's insurance or personal assets now.
  • I am really dealing with incomplete information to make an informed choice. PUB has not commented on the compensation amount to Hyflux if they were to take over Tuaspring. It is very difficult for retail investors to make a decision when such material information is not released, with confidentiality always cited. This fiasco just cannot simply be a "commercial decision" and the oft used dirty word called  "RISK" wantonly used to easily justify the loss of $900 million of 34,000 PnP investors and as much as 16,000 ordinary shareholders who are all mainly Singaporean Citizens. If disclosures would compromise the national security of a Nation, then perhaps PPP companies should no longer be allowed to be listed on an exchange and sold publicly since there is inadequate information to measure "RISK". What most investors are now thinking is :  Could there be a higher recovery for PnP investors?. Accepting the proposal then would be destroying this chance, wouldn't it?
  • I am also very disgusted by our regulatory body SGX and MAS. How can a dividend of perpetual securities be announced and also past it ex-dividend date and still not paid? This is the first time i am hearing this thing happen in Singapore. The total amount is more than $14 million owned to Perpetual Securities . Shouldn't SGX and MAS mandate that all listed companies in Singapore ring fence their dividends once the ex-dividend date has been passed, by putting it into an escrow account? How is there a fair and orderly market since ex-dividend date is a material information and many investors do use this information to invest?
18 May 2018 - Ex-dividend date
23 May 2018 - Court protection seeked
27 May 2018 - Dividend payable date

Source

I hope i have been using my head for the 3 points above. 

I have not even reached my heart yet. 

Pay Cut and Clawback of Salary 

When i am reading the affidavits and hearing from the ground, the staff morale in Hyflux is really low. Operational problems in other Hyflux projects has been mentioned by the mainstream media. 
It is very disgusting to me that the employees have been right sized, rental footprint has been reduced, assets sold off however, I could not find any mentioning of any pay cut or clawback of salary from Olivia Lum or Board of Directors. 

Despite calls for Olivia Lum to lead by example and reduce her pay since even before the first townhall ( based on what ordinary shareholders told me in their AGM) and repeatedly asked of her also during the every PnP townhall, she refuses. If one were to look at the dollar value of her salary only, one would say it would not make a difference to our recovery. I beg to differ. It does make a difference in staff morale which would eventually lead to higher recoveries.

A leader has to lead by example. 

Just looking at the amount of contingent liabilities that Hyflux has if it does not complete its projects properly, one will understand the absolute importance of STAFF MORALE. I would also go as far as to say that the 10% ( previously 20%) of management recipient payout to incentivise the project management to complete their projects properly could have been saved or reduced if STAFF MORALE had been higher. And i wonder how much of this 10% will be distributed to the rank and file employees to boost their morale.

If one is able to accept such VALUES, i think it would be easier to Vote Yes. I can't, hence i vote NO.
Hyflux Telegram Group for PnPs and MTNs
I am very inclined to agree with this anonymous poster.

February 28 - SIAS issued a letter on behalf of PnPs asking for a little more
March 8 - Letter stating that there will be an improved recovery

I can't imagine how fast they can get all the parties together to revise the offer in such a short time.
It seems to me like a psychological play to make retail PnP investors think they won a victory.

But the key takeaway from all this is.
The PnPs retail holders do have the mettle to go against the big boys and this is a good development for  Singapore. The general public who have been so vocal against the PnPs should ask themselves if they would like toxic securities , things that big boys don't want,  to be sold to the helpless retirees and the mom and pop investors without proper safeguards in place and inadequate disclosures. Also, big boys have money and resources, naturally the odds are stacked against the retail investors.

Who are you actually supporting when you are vocal against the PnPs?

For PnP and MTN holders who wants to vote NO but are unable to attend the voting on 5th April 2019. You can fill up this form to proxy others. This has to be done by 31 March since 2 April is the deadline to give the forms to Boardroom, a Corporate Secretarial Company and some leadtime is necessary for the volunteers. 

VOTE NO!

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
27) Another bomb to the retail investors of Hyflux
28)The Underrated Importance of Regulatory Risk - Hyflux
29)The Overlooked Importance of Another Regulatory Risk - Hyflux
30)Why did so many Singaporeans invest in Hyflux - The positive image illusion
31)On Why The Rich Get Richer And Poor Gets Poorer - The Hyflux Proposal is Out!
32)The " not spoken much" dirty little thing about the Restructuring Proposal - the $33 million - Hyflux
33) The Failure of the much touted Public-Private-Partnership Model in Singapore - Hyflux

Thursday, March 7, 2019

The Curious and Disturbing Default Notice of PUB - Hyflux

Created by an anonymous person, not me, who shared in the Hyflux Retail Telegram group. PnP refers to the perpetual and preference share holders.


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.

Desalination is one of the 4 National Taps of Singapore. The importance of water cannot be overstated and can be summed up in a quote from our Late Mr Lee Kuan Yew.

" Every other policy has to bend at the knees for our water survival. Water is a precious resource; without it you die. You can live without energy....But without water you dehydrate and die."
Quote from Lee Kuan Yew

Let us do the maths.
  • Olivia has stated that only 10% revenue is from water in the Townhall. You will have to plug in a earphone and turn up the volume to the loudest.


  • In annual report 2017, the amount of Tuaspring revenue is $ 174 million , so water revenue at 10% of revenue is $17 million.


  • It has been publicised that Tuaspring has a capacity of 318,500 cubic metre a day. 


  • It has been stated in an article that the price of water in the first year is 45 cents per cubic metre  sold by Hyfux to PUB. 


  • Total maximum water revenue from PUB if plant is ran at the target capacity of 318,500 cubic metres per day , for 1 year :

318,500 cubic metres per day X  365 days X $0.45 per cubic metres = $52 million
$17 million / $52 million = 33% of max capacity

  • PUB has also stated publicly that Hyflux has failed to provide the required plant capacity on multiple occasions, and problems surfaced since 2017.

  • Tuaspring is currently the largest desalination plant in Singapore and it is supposed to bring in 70 mgd ( equivalent to about 318,226 cubic metres which is nearly the same as the stated 318,500 cubic metres stated as the capacity of Tuaspring) . Out of the current 130 mgd of desalinated water that Singapore has as stated in the info-graphics below, Tuaspring makes up more than half of our current desalinated water supply. This makes Tuaspring the elephant in the room. A very important strategic project.


My Thoughts

It is very disturbing to me as a Singapore citizen that our water supply is not a strong as it seems to be protrayed. Tuaspring, which is supposed to provide more than half of our current desalinated water supply seems only able to produce 33% of its capacity, 105,105 cubic metres a day instead of 318,500 cubic metres a day.

It is very shocking to me that the problems at Tuaspring was already known by PUB in 2017 and yet this was not disclosed, citing confidentiality.

It was written in a Straits Times article titled " Parliament. Investors urged to take only risks they can live with".

In it, Minister Ong Ye Kung said" Risks are inherent in investment...." [Investors] " ......need to pay close attention to what is disclosed, look beyond potential returns and assess if they can also accept the risks that come with specific investments" See here for the full article.
The article ended off with " We will continue to educate the investing public on the trade-off between risk and return through the MoneySense programme," said Mr Ong.

I do not think the issue of this failed Public-Private-Partnership project which is Tuaspring that resulted in the loss of up to 50,000 retail investors is a matter that can simply be solved with more education. Neither is it a matter about the investors not paying close attention to what is disclosed.

Rather, the real problem is the lack of material disclosures which are swept under the category of confidentiality. 
Even as of 7 March 2019, material information which is needed for retail investors to make a decision on the proposed restructuring is still withheld.
Source here.

How could the Hyflux retail investors make any informed choice when material information is not given, under the reason of confidentiality?

Why couldn't PUB disclose the operational defaults much earlier?

Why wasn't the revenue of Tuaspring segmented into electricity and water in their annual reports so that investors could see clearly that Tuaspring is actually a power plant in disguise, instead of an ancilliary power plant?

Why wasn't a shareholder mandate called for when there was a material change in business such that the risk profile of the Hyflux has changed drastically when a large percentage of their revenue is from electricity instead of their traditional water business ?

And to end off. I think that to calculate 33% as the operational output of Tuaspring may actually be very optimistic. This is because i used 45 cents per cubic metre which is the first year price in 2013. We do not know what is the actual price of treated water sold to PUB in 2017.

If we use a direct comparison approach with the 2 latest desalination plant that are in progress, the price of water sold to PUB is 91cents and 108 cents. Source here and here. Let's say the price in 2017 that Tuaspring sells to PUB is the average of the two prices at  99 cents per cubic metre.

The actual operational capacity of Tuaspring may actually only be 15% ( 47,045 cubic metres instead of 318,500 cubic metres a day). This is definitely a cause for national concern.

Minister Masagos in his speech in parliament in 2018 stated:

“Where we have allowed private sector participation via the DBOO model, safeguards are in place. PUB has adequate measures to ensure DBOO plants remain in operation and supply is not disrupted. It is a top strategic priority of the Government to keep our taps flowing.”
Source here.

Why wasn't the operational problems at Tuaspring highlighted then or earlier in 2017 during Parliament, since it is of paramount importance to the water security of Singapore?

I am even more determined to VOTE NO to the structuring which would risk a $0 recovery. This is because i think there are more problems that needs to be brought to light. 
By accepting the restructuring, we, the retail investors, are condoning future instances of such cases to happen again in our country.
By accepting the restructuring, all may be buried and this is no good for the nation of Singapore. 
My country and my home.

MERDEKA SINGAPURA!

And who gave Olivia Lum the 8 million** population projection as mentioned in first Townhall which resulted in her overconfidence to take on Tuaspring? Turn up the volume and use a earphone.
Be patient and wait for it.


**No replies for clarification has been received thus far from Hyflux Investor Relations.

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
27) Another bomb to the retail investors of Hyflux
28)The Underrated Importance of Regulatory Risk - Hyflux
29)The Overlooked Importance of Another Regulatory Risk - Hyflux
30)Why did so many Singaporeans invest in Hyflux - The positive image illusion
31)On Why The Rich Get Richer And Poor Gets Poorer - The Hyflux Proposal is Out!
32)The " not spoken much" dirty little thing about the Restructuring Proposal - the $33 million - Hyflux
33) The Failure of the much touted Public-Private-Partnership Model in Singapore - Hyflux

Monday, February 25, 2019

The Failure of the much touted Public-Private-Partnership Model in Singapore - 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.

In 2004, the Ministry of Finance undertook a public consultation to seek views about the Public-Private-Partnership model. This initiative took root based on the studies about the successes of the PPP model in countries including the United Kingdom, Ireland, Australia, Hong Kong and Canada.

And lo and behold, the poster girl to spearhead this PPP model was Ms Olivia Lum who was the "highlight of the Forum."

A list of FAQs about the PPP model was also crafted here.
In addition, a PPP handbook has been uploaded by MOF here.


In 2014, there was a drive to promote Singapore as Asia's Infrastructure Hub in a joint effort by the Monetary Authority of Singapore and the International Enterprise of Singapore.
The marketing materials for this is here.


My Thoughts

Tuaspring is meant to be a Public-Private- Partnership model between the government and Hyflux. Based on the PPP handbook released by the Ministry of Finance(MOF) in March 2012, the PPP model is structured as a Win-Win deal. It must deliver value for money to government and also present commercially attractive business opportunities for the private sector.
2.3.3 Similarly, for the private sector, there should be sufficient revenue, either from Government or directly from the users, to recover the initial investment and the costs incurred by the private sector.  - Quote from page 27 of the handbook
The problem with Tuaspring is that it is an integrated water and electricity project. Water comes under the Public Utility Board (PUB) while electricity comes under the Energy Market Authority (EMA). It is very strange indeed that Tuaspring is placed under the auspices of PUB when only 10% of Tuaspring's revenue comes from water while 90% comes from electricity, according to Olivia Lum in the first townhall. In addition, Tuaspring needed an electricity license given by EMA to run and so is governed by the Electricity Act. In my opinion, the demise of Tuaspring may be  symptomatic of  the lack of collaboration between the two agencies.

How then can it explain why Tuaspring, being a PPP project, meaning Hyflux should be able to recover the initial investment and costs , end up in this pitiful state?

How then did Singspring, the first PPP project, which deals solely with water, end up successful and as i understand is currently still profitable?

In my opinion, i think it was a mistake right from the start for PUB to award Tuaspring or to allow Tuaspring to be an integrated water and electricity project if it was to be it's baby. This is because its very difficult to envision sufficient revenue for Tuaspring ( based on the PPP handbook guideline 2.3.3) since a very large percentage of its revenue is dependent on the USEP price of electricity which is market driven and PUB has no control over. EMA would have been a better fit for the job.

How then did PUB, when it awarded Tuaspring,  justify that Tuaspring would have sufficient revenue to cover investment and cost according to 2.3.3 of the PPP handbook? 

Putting it another way, it was wrong of whoever that arrowed PUB instead of EMA to award this integrated, predominantly power project. Or at the very least that whoever should have placed the integrated Tuaspring as a baby of  both PUB and EMA to make sure they collaborated.

It seems to me that without EMA having any responsibilities for Tuaspring, the electricity market was allowed to go into excess, 80% of electricity reserve instead of the target 30% of electricity reserve. 
Contrary to what some people say that it is only due to management incompetence, i would beg to differ since the whole electricity industry are facing losses or very low profitability, so its an industry wide malaise that could only be caused by a regulatory failure.

This reminded me of the question asked during the MOF consultation process in 2004. It is currently enshrined under the list of FAQs on MOF website.

How did the Ministry of Finance ensure that the public agencies work closely together in this Tuaspring project? Your guess is a good as mine.

And by the way, MOF has modeled the PPP model after UK. 
Similar to the concept of UK PPP taskforce, there is a unit within MOF that creates awareness of PPP, handles PPP policy and provides guidance on PPP matters. 
                                                                                                  - point 17 on MOF FAQ
Guess what has happened in the UK PPP model now according to this article released in 2017.

It is indeed a blow to the reputation of Singapore in its quest to be Asia's Infrastructure Hub especially when 60% of Hyflux's revenue is from the Singapore government.

And another blow to the reputation of Singapore in another of its quest to be the regional Debt Restructuring Hub if the restructuring of Hyflux fails.

The stakes are too just too high.



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
27) Another bomb to the retail investors of Hyflux
28)The Underrated Importance of Regulatory Risk - Hyflux
29)The Overlooked Importance of Another Regulatory Risk - Hyflux
30)Why did so many Singaporeans invest in Hyflux - The positive image illusion
31)On Why The Rich Get Richer And Poor Gets Poorer - The Hyflux Proposal is Out!
32)The " not spoken much" dirty little thing about the Restructuring Proposal - the $33 million - Hyflux

Saturday, February 23, 2019

The " not spoken much" dirty little thing about the Restructuring Proposal - the $33 million - 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.

I think there is a psychological play going on here. It seems mostly everywhere is showing a 24.7% recovery to the unsecured banks ( meaning for every $100, they will get back $24.7). It is not accurate . Instead, the recovery to unsecured banks are in a range of between 24.7% to 38%, depending on how much of the contingent liabilities materialises. 
24.7% is the worst case scenario that the unsecured banks will get. They could be getting back 38% too.

And it seems Olivia Lum and her Board of Directors are so magnanimous as to give up their retention ordinary shares of 1.26% of the company to the Preference and Perpetual Securities Holders. This "story" of magnanimity has been blown way out of proportion by many mainstream media, with one even wasting precious column space on the article " 6 things to know about Embattled CEO Olivia Lum" , casting her in a positive light.

Unknown to many who don't read the affidavits, categorized under segment of " Unsecured Claims Scheme Parties" is this little arrangement where some money is allocated to the management as incentives.
( page 32 of the 15 Feb Affidavits).



This is how the "Unsecured Claims " are going to be split up among the banks, MTN noteholders, contingent claimants and the management. $412 m ( $232 m in cash+ $180 m in implied value)  is the total amount allocated to this group. Based on the proportion of contingent claims value compared with the other unsecured claims, $166 m is placed in an escrow account for a "just in case" basis. This $166m will be further split into 20% for management and 80% for additional recovery to the banks and MTNs.  See below flow chart.

It must be noted that contingent claims are claims that may never come about. They materialize only when things do not go according to agreement, for example, projects not completed in time. 

Also, there is a lot of leeway for Hyflux to attach a value to this, therefore, i am very skeptical about the value of contingent claims. 

Based on assumptions ,it may be inflated to give more to management. 
It would also make the recovery to the unsecured claims party more reasonable as people will look at a very large amount of unsecured claims but actually, a large part are actually contingent claims that may never happen.

** I have earlier mentioned that $82 million could be allocated to the management and this is wrong. The amount should be around $33 million. 
This was edited due to a reader highlighting it.


My thoughts 

There is no mention as to who this group of management recipients are. It is not unreasonable to think that Olivia Lum or the CFO  may be among these management recipients. What is giving up 1.26% in shares ( total $8 million in shares only) to the Perpetuals and Preference shareholders , as compared to $33 million? 

Let's even imagine that Olivia Lum or the CFO are not among these management recipients. 
This incentives is still ridiculous. 

How can incentives be classified under unsecured claims together with bank loans?

Why are the creditors who have already lost most of their money due to the management's incompetence, be the ones now to share the pool of money to incentivise this incompetenet management to complete their projects? The onus of incentivising management should be the responsibility of the new owners, Salim, not those whose debts are extinguished and have little future benefits from the projects when completed.


What the hell is wrong with Hyflux's human resource policy, where incompetence is rewarded? 
An employee screws up and is paid more to make sure he corrects that mistake he created. 
Is this policy breeding a culture of incompetency or what?
VOTE NO 
because the proposal is bad and it can certainly be improved.

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
27) Another bomb to the retail investors of Hyflux
28)The Underrated Importance of Regulatory Risk - Hyflux
29)The Overlooked Importance of Another Regulatory Risk - Hyflux
30)Why did so many Singaporeans invest in Hyflux - The positive image illusion
31)On Why The Rich Get Richer And Poor Gets Poorer - The Hyflux Proposal is Out!

Saturday, February 16, 2019

On Why the Rich get Richer and the Poor get Poorer - The Hyflux Proposal Is Out!

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.

In the vain attempt to make an emotional connection to the retail investors so that we would more likely accept her proposal, this woman called Olivia Lum says "she is deeply saddened". And as an act of showing remorse, she says she will pass to the perpetual and preference investors her 1.26% of restructured shares. I think she knows it is worthless that's why!

If she was sincere,

1) she would have cut her pay and her BOD's (Board of Directors) pay very much earlier on.  She didn't do it and instead defended it, despite numerous pleas and queries during the 2 townhalls by the retail investors. I have written about her pay before here and compared with other Singapore companies such as Ezion when the founders and BOD's voluntarily cut their pay up to 71%, years before the situation blew up. In addition to her pay, she has been earning $58 million in dividends.

2) she would not have quickly given out the dividends in species of the Hyfluxshop in January 2018 to the ordinary shareholders. It is a known fact that there is NEVER any obligation at all to give out dividends to ordinary shareholders. Many companies don't even give any dividends. On the contrary, she was obligated to give the perpetual securities retail investors their coupons in May because of the terms. I wrote about it here  and here . The coupons for the perpetual securities retail investors even went EX-DIVIDEND already and yet it is not paid at all.
Take note that she owns 34% of ordinary shares and only 0.002% of perpetual securities.
Isn't it obvious where her motivations lie?

AND SGX AND MAS PLEASE ANSWER : how come coupons/dividends already went ex-dividend and yet it is still not paid?

3) she should have concentrated her efforts to save Hyflux instead of Hyfluxshop. Due to the dividends in species of hyfluxshop, it has become a private company. Olivia acquired the remaining shares of Hyfluxshop and now owns more than 76% of Hyfluxshop ( renamed as Elo Water Shop).  Hyfluxshop still owes $20 million to Hyflux. Guess what she did at her majority controlled privately held Hyfluxshop , she held contests with cash prizes and a BMW car.
Link is here.
Imagine the ridiculousness of it. Hyflux, the mother company, is facing a liquidity issue, yet, Olivia is spending cash to promote her Hyfluxshop which still owes $20 million to the mother company.

The Proposal

Based on the 15 Feb Affidavit, here is the proposal:

Perps and Prefs ( retail investors owed $900m )

For every $100 , we get back $3 in cash and $7.6** in ordinary shares.
Total: $10.6 back

Unsecured creditors ( banks and accredited investors owed $988 m) 

OCBC issued a report that stated that the unsecured creditors should be getting back $38* ( cash and shares) back for every $100 invested.


* This is assuming no contingent claims materialise
**The ordinary shares valuation is derived from the implied $667 valuation of the whole of hyflux based on offer by Salim of $400 million for 60% of a clean hyflux.


My Thoughts

This is a very bad deal for the retail investors of the preference and perpetual securities.
I actually think it is a very good deal for the unsecured creditors (banks and the accredited investors) and i think they will accept it.

The way this whole episode of restructuring is conducted is grossly unfair and not equitable from the beginning.

It feels like the deal is shaft down the throats of the retail investors, just because the retail investors , who are unsophisticated and do not have the MEANS are not able to offer their views.

In my view , SIAS has done nothing of importance to help retail investors. The two townhalls were mainly for information dissemination purposes. There was not enough time to ask questions. It was even worse in the second townhall when an APP called PigeonHole was used. It does not allow follow up questions to answers that will enable the retail investors to drill down to the truth. It felt in my own view, like an administrative process, probably just to fulfill or satisfy the court that the retail investors were "consulted".

The Informal Steering Commitee set up by SIAS for the retail investors was also unheard of. I have not heard from any of them and neither have many others in the Telegram group. Some people mentioned they were made to sign Non-Disclosure forms which could have resulted in them not being able to communicate with us. Then what is the point? Is this for show and for formality sake?

However, for the unsecured creditors, their views have been sought very frequently. They engaged lawyers and counter proposed. 

And the unsecured creditors succeeded in getting a very good deal. Cheers to them.

Indeed, the rich gets richer and the poor gets poorer.
Vote against the Proposal. It's an insult.


Get Hyflux and Salim to propose a better one and the unsecured creditors would likely give us more ......just because, they NOW have much more to lose..........



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
27) Another bomb to the retail investors of Hyflux
28)The Underrated Importance of Regulatory Risk - Hyflux
29)The Overlooked Importance of Another Regulatory Risk - Hyflux
30)Why did so many Singaporeans invest in Hyflux - The positive image illusion