Date: July 15, 2021
Attention: Mr. Richard Menezes
- SIAS refer to:
- the hearing of HC/CWU 89/2021 and HC/CWU 90/2021 held before the Honourable Justice Aedit Abdullah (“Judge”) on 12 July 2021; and
- your draft affidavit which was circulated to the creditors on 12 July 2021 (“Draft Affidavit”).
- As you would be aware, SIAS has always been in favour of a holistic restructuring of Hyflux Ltd and its subsidiaries (collectively, “Hyflux”) which would resolve the debts due by Hyflux to all of its creditors, including the holders of Hyflux Ltd’s S$500,000,000 6.00% Perpetual Capital Securities (ISIN: SG31B4000005) and S$400,000,000 8.00% Cumulative Non-Convertible Non-Voting Perpetual Class A Preference Shares (ISIN: SG2D17969577) (“P&P Holders”).
- While SIAS appreciates that Utico is the only remaining investor with an offer to the P&P Holders, SIAS is equally cognizant that Utico’s negotiations with Hyflux, and subsequently, the judicial managers appointed over Hyflux, has been a long-drawn-out affair which has consumed substantial time and effort of all stakeholders for more than 1.5 years with no result to show.
- While SIAS is supportive of a restructuring (as opposed to a winding up) of Hyflux, any restructuring proposal must be credible. Concrete milestones therefore need to be met if SIAS were to help canvass support from the P&P Holders for Utico’s potential application to extend the judicial management order so that a restructuring may be achieved. In particular, SIAS would require the following minimum commitments from Utico before the next hearing on 21 July 2021:
- as suggested by the Honourable Judge, a non-refundable deposit of S$10 million (“Deposit”) to be placed in Utico’s solicitor’s account or an escrow account in Singapore by 10:00am on 21 July 2021;
- an undertaking by Utico’s solicitors or the escrow agent by 10:00am on 21 July 2021 that the Deposit is to be released to Hyflux immediately upon the grant of an Order of Court extending the judicial management of Hyflux. Utico may wish to place restrictions on the use of the Deposit such as (i) allowing Hyflux to utilize the Deposit for working capital requirements to ensure that it is able to operate pending the completion of Utico’s restructuring proposal and (ii) not allowing the Deposit to be used to pay down fees of advisors or the judicial managers and their lawyers. SIAS would invite Utico to set out its proposed restrictions on the use of the Deposit for SIAS’s consideration; and
- an undertaking by Utico to provide a term sheet setting out the terms of Utico’s proposed restructuring proposal, which terms shall be not less favourable than the June2021 RM Offer (as defined in the Draft Affidavit) to Hyflux and its creditors by 31 July 2021. The said term sheet should also contain details on when Hyflux’s creditors may receive payment under the restructuring proposal and whether such payment is in the form of cash or other consideration.
- SIAS is also given to understand that Utico, as a potential investor, may not have standing to intervene in the judicial management of Hyflux and/or to oppose the winding up applications brought by the judicial managers. To address the issue of standing, SIAS would be prepared to put Utico in touch with some of the P&P Holders who may be interested in selling some of their holdings to Utico.
- Due to the shortness of time, SIAS would be grateful if Utico could respond to this letter by 16 July 2021.
- Thank you.
President and CEO