SINGAPORE: Embattled water treatment firm Hyflux and three of its subsidiaries on Thursday (Feb 21) received the go-ahead from the Singapore High Court to hold scheme meetings in early April for creditors to vote on its do-or-die restructuring plan.
Two creditor classes – the senior unsecured creditors and subordinated debt holders – will get to vote first on Apr 5, possibly via two separate meetings on the same day.
Senior unsecured creditors include the banks and medium-term noteholders. The subordinated debt holders refer to the large group of 34,000 perpetual security and preference share investors, who have been put together to vote as a single class.
Trade creditors of the three subsidiaries will have their scheme meeting on Apr 8.
To pass, the scheme needs to be approved by at least 50 per cent in number and 75 per cent in value of each creditor class present at these meetings.
The court on Thursday also granted mom-and-pop investors who hold Hyflux’s securities through nominees or custodians to cast their votes in person at the scheme meetings, and be counted both in number and value.
Under the law and as seen in the debt restructuring case involving Singapore-based offshore services firm Swiber Holdings, those who hold investments through nominees are not allowed to attend creditors’ meetings and have to be represented by these nominees.
A nominee can only be counted as one vote, regardless of how many investors it represents.
Hyflux will release a notice for the scheme meetings and an explanatory statement of its financial restructuring scheme in the coming days.
READ: Hyflux lays out restructuring plan to revitalise business, but retail investors lament big losses
WHY “RUTHLESSLY ELIMINATE” US: RETAIL INVESTOR
The clock is ticking down on Hyflux to sort out its financial woes. While its debt moratorium only finishes at end-April, it needs to get the okay from a majority of creditors and another court approval by Apr 16 before its S$530 million lifeline from Indonesian consortium SM Investments expires.
If the proposed scheme of arrangement fails to get creditors’ backing, Hyflux “will likely go for liquidation” which “can be quite brutal”, its legal advisor from WongPartnership told the court.
In a liquidation scenario, senior unsecured creditors can expect recovery rates of about 3.8 to 8.7 per cent, but those holding on to perpetual securities and preference shares will “probably get nothing”.
However, it remains to be seen whether Hyflux’s restructuring proposal can garner the votes that it needs for a second chance.
Recovery rates of 10.7 per cent and 24.5 per cent for its subordinated debt holders and senior unsecured creditors, respectively, have been cold comfort for many – so much so that some retail investors have said they would rather see Hyflux liquidated or are petitioning for counter proposals.
During the hearing, Justice Aedit Abdullah said he had received a letter and email from Madam Loo Leong Hun, a retail perpetual security and preference shareholder.
Mdm Loo, who was given an opportunity to air her concerns in court, said retail investors like her are willing to “waive or accept low coupons”, as well as consider “staggered capital redemptions or no capital redemptions until Hyflux sees better days”.
She urged the court to accept this proposal, which she described "as a glimmer of hope" for investors like her to recover their hard-earned savings.
“We understand what Hyflux is going through. We have been informed that the potential buyer does not want any debt therefore we have decided to step down,” she said.
“I wish to highlight that in this demand proposal, there are no contractual obligations to redeem capital or to pay interest, therefore it is not a debt and it is placed in the same classification as equity.
“Our ranking is the same as equity, so is there a need to write off the preference shareholders?”
She also referred to the company’s 2017 annual report, which suggested that perpetual securities do not fall under the category of a financial liability given that there is “no contractual obligation to repay its principal or to pay distribution”.
“So why is there a need to ruthlessly eliminate us from the balance sheet? We are a benign equity and not a toxic debt to Hyflux," she added.
Mdm Loo also said many elderly folk are among those who have invested their retirement funds into Hyflux. She cited an 86-year-old retiree who relied on dividends from her investments for daily expenses.
"Now (with mobility issues), it is not possible for her to work and recover her principal," Mdm Loo said.
“There are many others like her out there. Many Singaporeans will be affected by the new scheme proposed by Hyflux."
READ: SIAS to hold investor-only town hall session on Feb 25 for Hyflux perpetual, preference shareholders
Justice Aedit said he recognised the circumstances as “something unfortunate” but his role for Thursday’s hearing is “fairly limited” to assessing whether Hyflux’s application to convene scheme meetings meets minimum requirements.
“I am not in the position myself to put a proposal in. It has to come from the creditors as a whole," the judge added.
He said he has given copies of Mdm Loo’s letter to Hyflux’s legal advisors and other working groups. To that, WongPartnership lawyer Manoj Sandrasegara said he will pass on the letter to Hyflux’s board of directors and SM Investments.