Date: July 19, 2020
Over the past two weeks, Hyflux has made announcements on receipt of letters of interest and/or offers made by new potential investors, namely, Pison Investments Pte Ltd (”Pison”) and Unilegend Investments Pte Ltd.
Previously, Aqua Munda Pte Ltd (“Aqua Munda”) had also made an offer to the senior unsecured creditors. In addition, two other potential investors, namely, Longview International Holdings and FCC Aqualia had previously expressed their interest in investing in Hyflux.
No offer yet on the table for P&Ps from any of the new potential investors
While SIAS has previously met with representatives of Aqua Munda and was informed by Aqua Munda that it will be making an offer to the P&P Holders at the appropriate juncture, SIAS has to-date not received the terms of any offer from Aqua Munda in respect of the P&P Holders. SIAS urges Aqua Munda to table its offer for the P&P Holders at the earliest opportunity, and in any event, before 27 July 2020. In addition, while Hyflux has announced that Pison’s offer is backed up by a sum of S$200 million in PT Bank Mandiri, SIAS notes that Pison has not extended any offer to the P&P Holders yet. At the moment, the only offer on the table for the P&P Holders is therefore the recent Revised Utico Offer referred to in the Business Times article titled “Hyflux gets new S$485m cash, stock offer from Utico” dated 9 July 2020 (“BT Article”). However, as discussed below, the Revised Utico Offer has issues which need to be addressed.
In order to continue to help P&P Holders to achieve the best possible outcome in this restructuring, SIAS is willing to engage and meet with the representatives of any potential investor with concrete proposals for the P&P Holders and will, where appropriate, provide relevant updates to P&P Holders on the outcome of these engagements and meetings.
SIAS objects to any restructuring plan that excludes P&Ps
SIAS, however, does not look favourably on and is unable to support any potential investors and/or potential investments which do not contain a concrete proposal to resolve the debts due to the P&P Holders.
SIAS’ concerns on the Revised Utico Offer
SIAS notes that the detailed terms of the revised offer by Utico (“Revised Utico Offer”) are, at the moment, confidential. Neither Utico nor Hyflux has to-date made public the detailed terms of the Revised Utico Offer to the P&P Holders. SIAS strongly urges Hyflux to announce the terms of the Revised Utico Offer to all P&P Holders so that relevant and material information is provided to all its stakeholders, particularly the P&P Holders on a timely basis.
Based on publicly available information on the Revised Utico Offer, SIAS continues to have a number of concerns on the terms as set out below and calls on Utico and Hyflux to work together to address these concerns as soon as possible:
- Under the Revised Utico Offer, it appears that P&P Holders will no longer be given a choice to elect between an upfront payment option (previously, Option 1) and a deferred payment option (previously, Option 2). It appears that P&P Holders are forced to take an upfront payment option if they are classified as a Small P&P Holder (i.e., P&P Holders who hold less than S$10,000 of P&Ps) and a stock only option if they are classified as a Large P&P Holder (i.e., P&P Holders who hold $10,000 or more of P&Ps) though no further details have been provided. Neither have there been details of the proposal to be offered to the Large P&P Holders. SIAS is concerned as the cut-off mark of S$10,000 between Small P&P Holders and Large P&P Holders is arbitrary, and may be prejudicial to the Large P&P Holders who would be forced to take the shares of Utico and Hyflux without knowing the true value of these shares (see point 2 below) and without any certainty that the relevant Utico entity would successfully achieve listing status on a recognised stock exchange.
- It is unclear how the P&Ps can make an informed decision on the share component of the Revised Utico Offer given that there has been an absence of detailed, relevant information, including a formal valuation of the shares of the companies which are to be issued to them. SIAS reiterates its request for meaningful information to be provided and for due diligence rights to be granted to SIAS and its advisors. Given that the Revised Utico Offer now contemplates a mandatory shares option for all Large P&P Holders, it is even more critical that due diligence rights be given to SIAS and its advisors.
- Further, given that SIAS continues not to be given due diligence rights and has not sighted Utico and/or Utico Singapore’s finances, SIAS is unable to comment on whether Utico will be able to pay if Large P&P Holders exercise the put option which is proposed to be granted to them under the terms of the Revised Utico Offer.
- Despite repeated queries from SIAS, the Hyflux Board has to-date not stated if they will abstain from voting on the Revised Utico Offer and/or will be giving up their entitlement for the benefit of the P&P Holders.
- It remains unclear whether there would be a release of claims against Hyflux directors under the Revised Utico Offer. SIAS has on several occasions reflected feedback from the P&P Holders that there should be no release of claims against the Hyflux directors even if P&P Holders vote in favour of the Revised Utico Offer, and calls on Utico and Hyflux to seriously consider the P&P Holders’ requests.
SIAS would also like to highlight that the aforementioned initial concerns are issues and risks which the P&P Holders may have to take into consideration eventually. However, given the lack of detailed information about the offer from Utico, these issues and risks are likely to evolve further as additional information becomes available. P&P Holders should continue monitoring further announcements closely. That said, SIAS reassures P&P Holders that it continues to work with the relevant stakeholders to obtain clarity on the Revised Utico Offer and to assist the P&P Holders to make an informed decision on whether to accept the Revised Utico Offer.
SIAS would also ask like Hyflux to confirm that whether it has accepted or not accepted the Revised Utico Offer. In addition, SIAS requests Hyflux to provide us with the identities of the principals behind the potential investors.
David Gerald
Founder, President & CEO
SIAS
