Date: May 28, 2020
We refer to Hyflux’s announcement on 27 May 2020 enclosing Utico FZC’s (“Utico”) letter dated 26 May 2020 (“26 May Letter”).
SIAS understands Utico’s position to be that, because Utico’s deadline of 26 May 2020 (“Long-Stop Date”) has passed without, among other things, Court sanction being obtained for the proposed schemes of arrangement, and Utico’s claim that their request for KPMG’s report on Hyflux’s financials were only provided on 26 May 2020 instead of 27 January 2020, Utico’s previous offer is no longer on the table.
Utico’s current proposed deal is that no cash will be received by creditors. Instead, Utico will offer shares in Hyflux and, where applicable, shares in a Utico entity to creditors in various percentages. This must come as a shock to P&Ps, who were expecting to recover up to 50% of their initial investment in cash under the initial proposal.
Since the introduction of the governmental measures to address the COVID-19 situation in Singapore, SIAS had requested Hyflux to work towards extending the Long-stop Date and to provide clarity on when, and how, the scheme meetings are to be held. In particular, SIAS has reached out to Hyflux on multiple occasions in April and May 2020 to seek updates on the following issues:
- Whether Hyflux and Utico have reached, or were close to reaching, an agreement to extend the Long-Stop Date;
- What Hyflux’s plans were with respect to its restructuring moving forward if no agreement was reached with Utico to extend the Long-Stop Date; and
- When, and the manner in which, the scheme meetings were to be convened.
Hyflux has not responded to SIAS’s queries above.
SIAS is disappointed that it has now come to pass that, despite SIAS’s reminders, the Long-Stop Date has now lapsed and Utico’s revised offer as set out in its 26 May Letter is considerably less favourable than Utico’s earlier offer, as advised. Instead of receiving cash consideration, Utico’s current offer to the P&Ps is that “P&P will receive 5% of Utico and 12.5% of Hyflux as payment”.
SIAS notes that Utico’s position is that the current offer is only valid until 4 June 2020. Given the very short timeline, SIAS asks that Hyflux immediately seeks clarity on the revised offer for the P&Ps, including:
- Clarification on the name of the Utico entity whose shares are to be issued to the P&Ps;
- Whether, similar to the previous offer, the P&Ps are to elect between (i) an upfront option and (ii) a deferred option where shares will be issued over a period of time in respect of the issuance of shares and
- if the answer to (b) above is yes, what the offer for each option entails and if the offer includes a deferred distribution, whether security will be provided for such distribution.
SIAS also asks to be kept updated on Hyflux’s negotiations with Utico (if any) and that Hyflux keeps its stakeholders appraised of any material developments in those negotiations.
If there are any other investors which have expressed an interest in investing in Hyflux, SIAS would request that Hyflux provides a timely update to all its stakeholders and not keep its stakeholders in a state of uncertainty. Hyflux is still a listed company on SGX and it is the duty of the company and its directors to provide timely and transparent updates to its stakeholders, notwithstanding the challenges faced.
This restructuring commenced nearly two years ago and to-date is nowhere near conclusion. SIAS strongly urges that Hyflux takes all steps possible to bring the restructuring to a satisfactory and expeditious end for all stakeholders.
David Gerald J
Founder, President & CEO