Date: March 4, 2020
Reply from Hyflux to SIAS Queries Hyflux Board for P&Ps on 13 January 2020
Dear Mr. Gerald,
Thank you for your letter dated 13 January 2020, with reference to which this mail is sent on behalf of the Board of Directors (“Board”) of Hyflux Ltd (“Company”).
Queries relating to the Utico Offer
Although the Company and its advisors did their best to negotiate the best possible terms for the P&Ps, the terms offered to the P&Ps (as referred to in your said letter) pursuant to the restructuring agreement (the “RA”) were ultimately determined by Utico. These were commercial negotiations conducted on an arms-length basis and the Company firmly believes that it has done its best to obtain the best possible deal for the P&Ps given the circumstances.
The Company has noted the P&Ps’ concerns over Utico’s ability to meet their financial obligations under the proposed scheme. We believe that these questions should be addressed by Utico. To that end, we have instructed our legal advisors to reach out to Utico’s legal advisors, White & Case, to obtain further financial information on the Utico entities. The P&Ps may also wish to raise their concerns, including those relating to Utico’s ability to meet future financial obligations, with their advisors. The P&P’s advisors are in the best position to advise the P&Ps having regard to their best interests.
nTan Advisory Fees
When the Company was faced with the threat by the Unsecured Working Group (“UWG”), which consists of some of our unsecured bank creditors, to place the Company in judicial management (“JM”), the Board appointed nTan Corporate Advisory Pte Ltd (“nTan”) to advise the Company to inter aliastave off the JM threat, secure an investor and restructure the Company. The Board negotiated and agreed the terms of engaging nTan on an arms’ length basis. Had the Company gone into JM, the P&Ps would almost certainly receive no returns as the proceeds from the sale of the Company’s assets would be inadequate to repay the senior unsecured creditors in full after paying the judicial managers’ and liquidators’ costs.
In addition to advising the Board in staving off the attempt by the UWG to place the Company into JM, nTan has also provided invaluable advice to the Board in navigating the difficult restructuring process and dealing with the myriad of complex conflicting issues and challenges faced by the Company and the Board.
nTan has also played a pivotal role in advising the Board in securing and navigating the negotiations with Utico to reach agreement on the RA.
The Board is therefore of the view that the fees paid to nTan were fully justified.
Subsequent to nTan’s appointment, Mr Nicky Tan of nTan filed an affidavit on 25 May 2019 to persuade the Court that the Company should not be placed in JM. At a court hearing on 29 May 2019, the Court granted the Company an extension of the moratorium and the Court has since granted the Company additional moratorium extensions. In the course of these moratorium extensions, the Company and Utico entered into a Restructuring Agreement, and Aqua Munda Pte. Ltd. has offered to purchase certain debts of the Company and its subsidiaries under moratorium. These developments have given the P&Ps the opportunity to receive a better return than the almost certainty of no return if the Company had gone into judicial management.
Pursuant to the RA, Utico has agreed to set aside an amount of S$40 million to pay the unpaid fees (as at 1 September 2019) of some 24 professional advisors involved in the restructuring, including nTan. The total unpaid fees claimed and likely to be claimed by all the professional advisors is expected to be well in excess of this amount. The Company has previously discussed and agreed with Utico on a formula for paying all the professional advisors their estimated unpaid fees, expenses and disbursements.
SIAS Advisor Fees
SIAS Advisors (namely FTI Consulting, Akin Gump Strauss Hauer & Feld, BlackOak LLC, PriceWaterHouseCoopers Advisory Services Pte Ltd and Drew & Napier LLC) have been paid some S$2.4 million to-date. SIAS Advisors will also be paid their outstanding fees from the pot referred to in paragraph [8] above. With regard to your statement that the Company’s former legal advisors confirmed at the stakeholders’ meeting held on 6 December 2019 that a sum of S$1.5 million was held on trust for the SIAS Advisors, the Company would like to confirm that there was no such trust and we had raised questions with the Company’s former legal advisors about their representations to the Court.
Moving forward, the plan is for the SIAS advisors to be paid pro rata out of the sums that Utico is paying pursuant to the Restructuring Agreement. With reference to the Company’s announcement of 28 January 2020, we received a letter from Utico which raised the possibility that the amount for payment of the fees of professional advisors may increase from S$40 million to S$50 million. As you may be aware, the Company’s legal advisors have written to Utico to clarify the circumstances under which the sum of S$50 million would be available to pay all of the professional advisors. Based on the projections and estimates provided to the Company, if the scheme is passed and the sum of S$50 million is made available by Utico, it is anticipated that all verified outstanding professional advisors’ fees would be paid to a significant degree.
If the additional S$10 million were not available, based on the original sum of S$40 million referred to in Clause 7.2 of the RA, the Company had initially planned for a pro rata distribution that would satisfy at least 75% of the professional advisors’ fees (subject to verification by Hyflux of the relevant invoices and, if necessary, taxation of the relevant professional advisors’ fees). However, the Company will need undertake a re-allocation exercise to take into account WongPartnership’s sudden discharge as the Company’s legal advisors, and the need to engage new legal advisors to take over conduct of the various matters previously handled by WongPartnership at short notice.
Aqua Munda
We note the P&P ISC members’ queries in respect of Aqua Munda. We will inform Aqua Munda of the queries and ask Aqua Munda to address them.
Conclusion
The Company would like to express our appreciation to SIAS and all the stakeholders of the company for their patience in engaging with us throughout this restructuring process.
