Over 400 investors turn up for townhall meetings by Utico on Hyflux rescue deal

A view of the town hall meeting for investors holding Hyflux’s medium-term notes and perpetual securities and preference shares held at Suntec City Convention Centre on Jan 20, 2020. ST PHOTO: ARIFFIN JAMAR

SINGAPORE - Over 400 investors showed up at two townhall meetings held on Monday (Jan 20) by United Arab Emirates utility firm Utico on the matters relating to the restructuring of troubled water treatment firm Hyflux.

This comes after Hyflux signed a $400 million rescue deal with Utico last November that is pending approval of its creditors.

Utico chief executive Richard Menezes said on Monday that he is confident that Utico can get the vote in terms of numbers of voters, but he wasn't as sure in terms of value.

That is because he believes that at least 15 per cent of PnP investors who had invested more than $150,000 are not likely to support the deal as they stand to get less than 7 per cent recovery.

Some 60 per cent of the 34,000 were among those who invested between $10,000 and $15,000, are likely to get about 15 per cent recovery.

A morning session was held at Sheraton Towers for investors holding medium-term notes (MTN), followed by an evening session at Suntec City Convention Centre for perpetual securities and preference shares (PnP) investors.

Among questions raised were what role chief executive Olivia Lum will have after the restructuring and whether investors of significantly larger sums can get a better payout.

"The new board of Hyflux will decide. Her role will be decided by the new management. There is no pre-agreed role or understanding with Olivia," Mr Menezes said.

Hyflux had sought court protection for debt restructuring in May 2018. Last week, Hyflux applied for a three-month extension of its debt moratorium and to hold scheme meetings, which will be heard on Jan 29.

To pass, the schemes of arrangement need to be approved by at least 75 per cent in value and 50 per cent in number of each creditor class.

Mr Menezes appealed to the 70 MTN investors who attended Monday's townhall meeting to vote in favour of the restructuring plan it had signed with Hyflux.

These investors belong to a group of unsecured senior creditors who are owed $265 million. This comprises $100 million, 4.25 per cent notes due in 2018; the $65 million, 4.6 per cent notes due in 2019; and the $100 million, 4.2 per cent notes due in 2019.

Under the deal, they stand to recover $42 million in two tranches if the restructuring is allowed to proceed. They should get their first payment in April and another over the next 18 months, Mr Menezes said.

He added that the payout Utico is offering exceeds what MTN holders will get according to a liquidation analysis by EY. If Hyflux were to be liquidated, the investors stand to get between $7.5 million and $16 million.

Retiree Madam Yap, 70, who attended the town hall session for MTN investors, felt Utico's offer is still a far cry from the $250,000 she invested. Under the deal, she stands to receive about 15 per cent of what she invested.

Meanwhile, retail PnP investors, who are owed $900 million, stand to recover between $50 million to $100 million. They can choose to either be paid upfront or to be paid in half-yearly intervals over a four-year period.

The PNP holders who opt for upfront payment will stand to receive up to 50 per cent of the value of their debt securities holdings, capped at $1,500.

Those who opt for deferred payments, which will be paid in half-yearly intervals over four years, will be entitled to receive up to 50 per cent of the value of their debt securities holdings, capped at $1,500.

They will also receive a pro rata share in an additional cash payout. If all PNP holders opt for the deferred payment option, the quantum of the additional cash payout will be $50 million.

An investor who only wanted to be known as Mr P. Leong, who had invested $70,000 in PnPs, called the $1,500 payout "ridiculous".

"If the final offer from Utico isn't good, then we will vote against the Utico offer and Hyflux can go into liquidation. We will then pursue a class action suit against the Hyflux board of directors," he said.

A number of retail investors who hold "substantial debt" plan to block the Utico offer, according to the Securities Investors Association (Singapore) or Sias, who said they were doubtful of Utico's ability to meet its financial obligations under the proposed scheme.

Sias added that there has been sparse financial information on Utico FZC and Utico Singapore, which are providing the guarantee or share pledge to PnP holders choosing the second option.

Separately, there is a success fee of up to $25 million payable to Hyflux adviser nTan Corporate Advisory, helmed by principal Nicky Tan. PnP holders want a "full understanding" of this fee, or else they will vote against the Utico deal.

The current valuation of Hyflux is significantly below the proposal we put on the table. This is more than a fair deal, Utico's banker Mr Asar Mashkoor, managing director of investment banking with Emirates NBD Capital, and Utico's banker, told the PnP investors.

"Our offer of $400 million is well above Hyflux's liquidation value of $100 million. That ($400 million) value is there only if Hyflux's debt can be extinguished. The company is losing money. If no investor comes to invest in the business, then Hyflux will just run out of cash. That $4.5 billion worth of debt is the bottleneck in the deal," Mr Mashkoor added.

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