Hyflux retail investors get bigger cash recovery after senior creditors give up part of their share

Hyflux owes $1.68 billion to unsecured creditors, including $678 million to contingent claimants.
Hyflux owes $1.68 billion to unsecured creditors, including $678 million to contingent claimants.ST PHOTO: LIM YAOHUI

SINGAPORE - The 34,000-strong group of Hyflux perpetual securities and preference shareholders who are owed $900 million have succeeded in wrangling a bigger compensation amount after senior unsecured creditors agreed to give up some of their share.

The Straits Times understands that retail investors of the perpetual securities and preference shares can now 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 gave up $40 million of $84 million, which is what the unsecured creditors 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 are voting on April 5 on a critical restructuring plan on which the survival of beleaguered water treatment firm Hyflux hinges.

Many retail investors of the perpetual securities and preference shares were initially opposed to the restructuring plan as they were likely to get only a "meagre fraction of the original principal", Mr David Gerald, president of the Securities Investors Association (Singapore), or Sias, said in a letter to the Hyflux board last week.

Hyflux owes $1.68 billion to unsecured creditors, including $678 million to contingent claimants. Contingent liabilities include bankers' guarantees, performance bonds and liquidated damages in a construction project if there are delays. These claims get 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 claim is extinguished.

But in a Singapore Exchange filing on Friday (March 8) afternoon, Hyflux proposed amending the restructuring plan.

This would allow the perpetual securities and preference shareholders to share with the unsecured senior creditors the upside from any contingent liabilities that are extinguished.

Under the new plan, managers that helped to complete projects and get contingent claims extinguished will get 10 per cent instead of 20 per cent. None of this money will go to Hyflux founder Olivia Lum and her management team or the Hyflux board, a source close to the restructuring told The Straits Times.

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.