Sias asks Utico, Hyflux to clarify rescue deal terms for PnP investors

Hyflux owes $900 million in perpetual securities and preference shares principal value to about 34,000 retail investors.
Hyflux owes $900 million in perpetual securities and preference shares principal value to about 34,000 retail investors.PHOTO: ST FILE

SINGAPORE (THE BUSINESS TIMES) - The Securities Investors Association (Singapore) or Sias is seeking clarification on several terms of Utico's proposed rescue deal for holders of Hyflux's perpetual securities and preference shares (PnP).

Certain statements were made during the Jan 20 town hall meeting by the Emirati utility's team "which were either different from what Sias understands the position to be or require clarification", said Mr David Gerald, Sias founder and president, in a statement on Tuesday (Feb 4).

Mr Gerald invited Utico and/or Hyflux to clarify or confirm these six points:

- Utico stated that if a PnP investor holds securities through more than one account, the investor will receive up to $1,500 per account. Sias asked whether this means that if an investor has PnP holdings through three banks, that investor may stand to receive $4,500.

- Utico also said during the town hall that 1.5 per cent interest will be paid on the deferred amounts under the second option of the deal for PnP holders. Sias requested confirmation of this 1.5 per cent figure.

- Under the current scheme terms, PnP holders who choose the second option will receive the cash equivalent of a 4 per cent stake in Utico if the Middle Eastern firm lists within two years of the completion of Hyflux's restructuring. At the town hall, Utico said that even if such a listing takes place after the two-year period, it will still consider paying PnP holders a certain amount, also referred to as a "soft landing". Sias would like confirmation that Utico now agrees to provide this "soft landing" and how much the amount will be.

- The initial deal under the second option was that the additional cash amount to be distributed to the PnP holders will be at least $50 million, although this was later changed such that the additional cash amount will be reduced based on the percentage of PnP holders who choose the first option, Mr Gerald said. He asked for an explanation as to why Utico said there has been no change in the deal in this respect.

- At the town hall, Utico also said it is willing to include the cash equivalent of 4 per cent of Hyflux shares in the additional cash amount under the second option. Sias is seeking confirmation that this is on the table, so that the scheme terms can be amended accordingly.

- The utility firm had pointed out at the town hall that its offer is not open to Hyflux chief executive Olivia Lum and Hyflux directors who have PnP holdings. Sias asked whether this means Ms Lum and the directors will give up their entitlements under the proposed scheme for the benefit of the other PnP holders.

 
 
 

Meanwhile, Sias also requested a copy of all financial information on Utico and the investment special purpose vehicle, which had earlier been provided to the advisers of the senior unsecured creditors.

"Providing snippets of financial information at town hall meetings (to the PnP holders) is not helpful as detailed analysis cannot be carried out," Mr Gerald noted. The requested information is important to ascertain Utico's ability to meet their obligations under the proposed scheme, he added.

Hyflux owes $900 million in PnP principal value to about 34,000 retail investors, one-third of whom are smallholders who own $5,000 and less, according to Utico's chief executive Richard Menezes.

Two weeks ago, the Emirati utility firm convened the town hall session for the PnP holders, on the same day as a separate session for some 70 medium-term note holders.

On Tuesday, Mr Gerald said Utico had stated during the town hall that Sias and its advisers have not worked towards achieving a better deal for the PnP holders.

"Sias is disappointed that Utico has chosen to make such an allegation when it well knows that Sias has - directly to Utico and Utico's advisers and through Hyflux's advisers - consistently advocated for improved terms for the PnP holders in meetings, correspondence and conference calls," Mr Gerald said in the media statement.