The 34,000-strong group of Hyflux perpetual securities and preference shareholders who are owed $900 million have succeeded in getting a bigger recovery after senior unsecured creditors agreed to give up some of their share.
The Straits Times understands that retail investors of perpetual securities and preference shares can now potentially recover up to 7.4 per cent cash, or $67 million of their claims - up from 3 per cent cash, or $27 million - should all the contingent claims drop off.
This comes after the senior unsecured creditors - which include banks and medium-term note holders - gave up $40 million of their $84 million share, which is what they would have received if the contingent claimants dropped all claims against Hyflux, The Straits Times understands.
This could make it more palatable for investors who will vote on April 5 on a restructuring plan, which the survival of the beleaguered water treatment firm hinges on.
Analysts called this a bid to appease disgruntled retail investors of perpetual securities and preference shares, many of whom were opposed to the restructuring plan.
The opposition was because they were likely to get only a "meagre fraction of the original principal", Mr David Gerald, president of Securities Investors Association (Singapore), or Sias, said in a letter to the Hyflux board.
Sias represents an informal steering committee of these investors, which had submitted an alternative plan last week in the hope of clawing back more money.
Hyflux owes $1.68 billion to unsecured creditors, including $678 million to contingent claimants. Contingent liabilities include banker's guarantees, performance bonds and liquidated damages in a construction project if there are delays. These claims are extinguished if Hyflux is able to fulfil the contracts and projects satisfactorily without delay, or if the contingent claimants give up their claims.
Under the current plan, if the contingent claimants drop all claims against Hyflux and forgo their entitlement under the plan, the unsecured creditors' recovery will jump to 80 per cent, while the perpetual securities and preference shareholders get nothing.
The remaining 20 per cent will be distributed to managers of the projects for which the contingent claims are extinguished.
But in a Singapore Exchange announcement yesterday, Hyflux proposed amending the plan to allow the perpetual securities and preference shareholders "to share with the unsecured (creditors), the upside from contingent liabilities" that get extinguished.
Under the new plan, project staff responsible for the extinguishing of contingent claims will get 10 per cent instead of 20 per cent.
None of this money will go to the present Hyflux board or senior management.
The remaining 90 per cent of cash allocated to the extinguished contingent claims will be proportionally distributed between the investors of perpetual securities and preference shares and the unsecured creditors.
But the senior creditors did not agree to one proposal.
Mr Gerald had suggested earlier that in the event any contingent claim is extinguished, the recovery allocated to such contingent claim - including the contingent claim by Mitsubishi Heavy Industries (MHI) and its related companies of about $230 million - should be distributed proportionately between the rest of the unsecured creditors and perpetual securities and preference shareholders.
Hyflux said the claim by MHI will not be part of the scheme and MHI will not be a scheme party. "The Hyflux scheme sought to balance the competing legal and commercial interests of all scheme parties and we hope the amendments proposed serve to better achieve this," the firm said yesterday.