Date: February 4, 2020
SIAS refers to the Utico Townhall meeting held on 20 January 2020. Certain statements were made at the Utico Townhall by the Utico team, which were either different from what SIAS understands the position to be or require clarification. We set out these statements below and would invite Utico and/or Hyflux to provide clarification as soon as possible.
Particularly, Utico also stated at the Utico Townhall that SIAS and its advisors have not worked towards achieving a better deal for the P&P Holders. SIAS is disappointed that Utico has chosen to make such an allegation when it well knows that SIAS has, directly to Utico and Utico’s advisors and through Hyflux’s advisors, consistently advocated for improved terms for the P&P holders in meetings, correspondence and conference calls. We set out below a summary of the various steps taken by SIAS to-date with respect to Utico’s offer.
SIAS has worked, in the past on numerous restructurings. In all restructurings, its role has been to provide facilitation with the appropriate stakeholders and provide assistance through conciliation and advice for investors, most of whom are retail investors, whose interests have been compromised. Our over-riding responsibility is to preserve value for all stakeholders. For the Hyflux restructuring, SIAS and its advisors have worked to facilitate the restructuring process for the 34,000 P&P holders and to help improve their position as far as possible.
We would invite Utico to check the facts with its advisors and with Hyflux (who has coordinated communications between the various creditors’ advisors and Utico) before making any allegations against SIAS and its advisors.
Clarification Points arising from Statements made at the Utico Townhall
- Utico stated that if a P&P holder holds securities through more than one account, it will receive up to $1,500 per account. This means, for example, if a P&P holder holds securities through 3 different banks, that holder may stand to receive $4,500. Confirm whether this position is correct.
- Utico stated that 1.5% interest will be paid on the deferred amounts under Option 2. Confirm the figure of 1.5%.
- The current scheme terms provides that P&P holders who elect Option 2 will receive a share of 4% in cash value of Utico if Utico lists on a stock exchange within 2 years of the date the restructuring is effective. Utico stated at the Utico Townhall that if the listing takes place after the 2 year- period Utico would still consider paying the P&P holders a certain amount. This payment was referred to as a “soft landing”. As Utico would be aware about SIAS’s consistent position relating to the “soft landing”, confirm that Utico now agrees to provide the “soft landing” and confirm (a) how much Utico is prepared to pay the P&P holders in respect of the “soft landing” and (b) what is the period of the “soft landing”.
- The initial deal for Option 2 was that the Additional Cash Amount would be at least $50 million. This deal has now been changed such that the Additional Cash Amount will be reduced based on the percentage of P&P holders who choose Option 1. Utico’s position is that the deal has not changed and that was also communicated to the P&P Holders at the Utico Townhall. Given that the amount to be distributed to the P&P holders in Option 2 will reduce, explain why Utico says that there has been no change in the deal. SIAS has been seeking an explanation from Utico on this since the change was first made known to them in November 2019 and has, notwithstanding raising this issue in a press statement dated 20 November 2019 and in an email dated 13 January 2020 to Hyflux Ltd (“Email”), not yet received a satisfactory answer.
- Utico stated at the Utico Townhall that it is willing to include the cash equivalent of 4% of Hyflux Ltd to the Additional Cash Amount. Confirm whether this is on the table so that the scheme terms can be amended accordingly.
- Despite (a) numerous requests from SIAS’ advisors and (b) providing financial information to the advisors for the senior unsecured creditors, Utico has refused to share any financial information on themselves and the investment SPV who are to have financial obligations under the proposed scheme. Utico has refused to provide such information but at the Utico Townhall, snippets of such financial information were shared with the P&P holders. Obviously the requested financial information is important to ascertain Utico’s ability to meet their obligations under the proposed scheme especially since the payment horizon for the P&P holders who choose Option 2 will stretch as far as 4 years from the date the scheme is effective. But providing snippets of financial information at townhall meetings is not helpful as a detailed analysis cannot be carried out. SIAS would invite Utico to provide SIAS and its advisors with a copy of all the financial information which has been provided to the advisors to the senior unsecured creditors.
- Utico stated that the “Utico offer is not open to Hyflux directors”. Confirm whether the directors will be giving up their entitlement for the benefit of the other P&P Holders. SIAS and its advisors have sought clarification on this issue as early as August 2019 and has also repeated this in the Email. SIAS’s position is that Olivia Lum and Hyflux’s directors ought to give up any entitlements under the proposed scheme. Please therefore confirm the position of Olivia Lum and Hyflux’s directors on whether they will receive entitlements under the proposed scheme.
Summary of Steps taken by SIAS and its advisors on the Utico deal
SIAS had, from the start of the restructuring, organised and facilitated the appointment of legal and financial advisors for the benefit of the P&P holders as well as the appointment of the informal steering committee.
In August 2019, when there was a possibility of the P&P holders being excluded from the restructuring altogether, SIAS came out strongly in a press statement dated 7 August 2019 to state that the P&P holders should not be excluded from any deal. In addition, when the Utico deal was first proposed, the terms of the deal for the P&P holders were entirely unclear and SIAS had to write to Utico to request clear terms to provide certainty for the P&P holders. Ever since the terms of the deal were laid out, SIAS and its advisors have been closely reviewing the terms and have been requesting for better terms and more clarity on the deal to put the P&P holders in the best possible situation given the circumstances.
Aside from the weekly stakeholder meetings where SIAS’ advisors raised comments and questions on the draft term sheet and restructuring agreement, SIAS and its advisors have also engaged Hyflux and/or Utico on many other occasions including the following:
- On 17 May 2019 – SIAS issued a press statement encouraging Hyflux and the banks to steer away from judicial management as that would undermine the interests of the retail investors.
- On 22 May 2019 – SIAS met with Utico and among things, requested that Utico provide Hyflux with a binding term sheet/agreement on the terms they were prepared to propose. This was with a view to reduce the uncertainty on the Utico deal.
- Between 29 May 2019 and 31 May 2019 – various emails were exchanged between Utico and SIAS, where SIAS again requested that Utico clearly set out the deal for all the creditors including the P&P holders. SIAS also welcomed all offers which are beneficial to the P&P holders.
- On 1 August 2019 – Utico held a focus group meeting which was organized by SIAS at Utico’s request.
- On 7 August 2019 – SIAS issued a press statement stating that it will not support any suggestion that the P&P holders be excluded from any deal.
- On 22 August 2019 – SIAS’ advisors sent Hyflux’s and Utico’s advisors their comments on the draft term sheet asking for a number of terms to be improved.
- On 23 August 2019 – SIAS’ advisors sent Utico’s advisors further comments on the revised term sheet
- On 26 August 2019 – SIAS’ advisors held a conference call with Utico’s advisors on the terms set out in the term sheet and followed up with an email thereafter recording the conversation
- Between 26 August 2019 and 28 August 2019 – SIAS conducted a survey on the views from the P&P holders who attended the Focus Group Meeting in relation to the Utico deal
- On 28 August 2019 – SIAS’ advisors sent Utico’s advisors another email, setting out among other things, various concerns on the deal terms
- On 4 September 2019 – SIAS’ advisors wrote to Utico’s advisors to ask for updates
- On 6 September 2019 – SIAS’ advisors wrote to Hyflux’s advisors on further points on the Utico deal
- On 29 September 2019 – SIAS released a press statement to clarify a number of statements made in various media reports by Utico to ensure that the P&P holders do not receive misleading information
- On 20 November 2019 – SIAS’ advisors wrote to Hyflux’s advisors regarding the changes to Option 2 of the deal for the P&P holders at the eleventh hour and the outstanding concerns and requests
- On 18 November 2019 – SIAS’ advisors spoke with Hyflux’s advisor regarding certain concerns on the restructuring agreement
- On 20 November 2019 – SIAS released a press statement expressing concern that there is no finality on Utico’s offer and urged all stakeholders to work towards a deal which is commercially acceptable to all parties
- On 20 November 2019 – SIAS’ advisors wrote to Utico and Hyflux’s respective advisors to state that a change has been made at the eleventh hour to the entitlement which P&P holders would receive under Option 2, and to list out outstanding concerns and requests
- On 22 November 2019 – SIAS’ advisors spoke with Hyflux’s advisor regarding certain concerns on the revised restructuring agreement
- On 25 November 2019 – SIAS’ advisors wrote to Hyflux’s advisors to seek clarification on the timelines for payment under both Option 1 and Option 2.
- On 27 November 2019 – SIAS’ advisors attended a meeting with Utico’s advisors to discuss outstanding concerns and requests.
- On 30 December 2019 – SIAS released a press statement to request more transparency from Aqua Munda
- On 8 January 2020 – SIAS’ advisors wrote to Hyflux’s advisors to provide Hyflux with SIAS’ preliminary comments and proposed amendments to the draft scheme document.
- On 9 January 2020 – SIAS’ advisors spoke with Hyflux’s advisors regarding the proposed Utico Townhall for P&P Holders.
- On 13 January 2020 – SIAS released a press statement setting out, among other things, its certain key concerns in relation to the Utico deal for the P&P Holders
- On 16 January 2020 – SIAS’ advisors spoke with Hyflux’s advisors regarding concerns about voting rights
- On 20 January 2020 – SIAS’ advisors wrote to Hyflux’s advisors to seek clarification on whether the votes of Hyflux’s directors who hold P&P Holders would be discounted for voting purposes at the proposed scheme meeting.
- On 22 January 2020 – SIAS’ advisors wrote to Hyflux advisors with further comments and amendments to the draft scheme document.
SIAS will continue to advocate for the P&P Holders and will not tolerate any allegations that it has failed to do so.
SIAS disagrees that it has been passive and any suggestion that it supports Hyflux without question is rejected as evidenced by the aforesaid record.
As a practical matter, SIAS cannot be instructed by all 34,000 retail investors as there are real practical difficulties with doing so. Notwithstanding that, SIAS has worked within the perimeters available to advocate for the interests of the P&P holders. As set out above, SIAS has organised and facilitated the appointment of legal and financial advisors for the benefit of the P&P and MTN holders as well as the appointment of the informal steering committee. It has also organised townhall meetings to help disseminate information about the rights of the P&P holders in an insolvency context, and the pros and cons of the deal being proposed to them.
In fact, for the Hyflux restructuring, SIAS and its advisors have gone beyond playing a facilitative role and has pushed for a better substantive deal for the P&P holders. SIAS has also not been afraid of calling Hyflux to task as is apparent from its letter to Hyflux on 8 February 2019 where it requested certain clarifications from Hyflux on, among other things, certain decisions made by the board before Hyflux entered the restructuring process and the Email sent to Hyflux.
SIAS is not in a position to go into the details of the negotiations of the deal now because of confidentiality obligations, but hopes that moving forward, all parties work towards creating value for Hyflux’s stakeholders.
SIAS reserves its rights.
Founder, President & CEO
Securities Investors Association (Singapore)