No 'impropriety' by DBS found to date in May 2016 sale of $500m in Hyflux perpetual securities: MAS

DBS was the sole lead manager and bookrunner of Hyflux' issue of $500 million 6 per cent perpetual bonds on May 27, 2016.
DBS was the sole lead manager and bookrunner of Hyflux' issue of $500 million 6 per cent perpetual bonds on May 27, 2016.PHOTO: ST FILE

SINGAPORE - The Monetary Authority of Singapore said on Monday morning (April 8) that its supervisory reviews to date have not uncovered any impropriety on the part of DBS in performing its roles as both issue manager and distributor of Hyflux perpetual securities in 2016.

DBS was the sole lead manager and bookrunner of Hyflux's issue of $500 million, 6 per cent perpetual securities on May 27, 2016.

The issue was for the purpose of redeeming the $475 million perpetual securities earlier issued to accredited investors. In view of strong interest from retail investors, the size of the public offer was increased from $115 million to $329 million. Hyflux's directors, management and employees were allocated $6 million and the remaining $165 million placed out.

The Straits Times understands that MAS was responding to queries by Bloomberg.

Hyflux last week aborted a $530 million investment deal with would-be rescuer SM Investments (SMI) on the eve of a critical creditors’ vote scheduled for April 5, throwing its own future into doubt.

Around 34,000 retail investors sank a total of $900 million into Hyflux perpetual securities and preference shares. They stand to lose everything if the water treatment company fails in its debt restructuring attempt and ends up liquidated.

 
 
 
 

MAS in its response to the Bloomberg queries, said that as the issue manager, DBS conducted due diligence checks to ensure that material information relating to Hyflux was highlighted in the offering document.

"We note that Hyflux had disclosed in its offering document in 2016 that the Tuaspring power plant was expected to incur losses if electricity prices in Singapore were to remain low. The offering document was also cautious on the outlook for the water and energy markets," MAS said.

Further, MAS noted that "as a distributor of the securities, DBS complied with MAS' requirements to configure its ATM screens to remind investors to read the disclosure documents before making their applications".

The offering of securities through ATMs has been available since 1993. This has provided investors with a more convenient subscription channel for IPOs of shares or bonds.

"All investments carry risks. The deterioration in Hyflux's financial conditions that led to losses for investors illustrates this," MAS said.

"MAS, through the national financial programme MoneySENSE, has been working with industry and other stakeholders to educate investors about the features and risks of the various investment products and encourage investors to seek financial advice if needed. This also includes emphasising the importance of diversifying one's investment portfolio," it added.

Separately, DBS was also the sole lead manager and bookrunner of Hyflux's issue of $400 million, 6 per cent preference shares on April 25, 2011, with retail investors allocated $200 million worth. The net proceeds were used to fund Tuaspring.