SINGAPORE: For every S$1,000 invested, a holder of Hyflux’s perpetual securities and preference shares will recover S$106.54, or an implied return rate of 10.7 per cent, under the company’s newly announced restructuring proposal.
This includes a cash payout of S$30.15 and an implied equity return of S$76.39.
For medium-term noteholders, who are of a higher priority on the creditors’ list, the implied return rate is 24.6 per cent, or S$246.35 for every S$1,000 invested.
The cash component for this is S$138.72, while the implied equity return is S$107.63 if the restructuring goes through.
This breakdown in implied returns for investors was made known at a briefing organised by Hyflux on Saturday (Feb 16) afternoon, hours after it announced its closely-watched restructuring plan.
The media session was chaired by a Hyflux spokesperson, alongside the company's legal and financial advisors. Top executives from the company were not present.
Hyflux's proposed rescue plan comes nearly nine months after the former star company unexpectedly embarked on a restructuring exercise last May and halted trading in all of its SGX-listed shares, leaving tens of thousands of investors reeling.
Last October, it announced a potential lifeline from Indonesian consortium SM Investments, which proposed to invest S$530 million – S$400 million equity injection and a S$130 million shareholder's loan – in exchange for a 60 per cent stake. This values Hyflux at S$667 million.
Out of the S$400 million, S$129 million has been set aside for working capital, leaving about S$271 million for the restructuring, Hyflux's financial advisor told reporters at the briefing.
Under the proposed plan, unsecured creditors will be allocated S$232 million in cash and 27 per cent of the company’s shares post-restructuring.
Holders of perpetual securities and preference shares will receive a cash payout of S$27 million and 10.26 per cent of shares. They also get an additional “top-up” from founder-CEO Olivia Lum and the company’s board of directors, who had earlier said they would be contributing their stakes in the company, as well as entitlements from the restructuring, for redistribution among other stakeholders.
READ: Hyflux lays out restructuring plan to revitalise business, but retail investors lament big losses
The company’s spokesperson said this was decided after “extensive negotiations” with creditors.
Still, for many retail investors that Channel NewsAsia spoke to, the proposed recovery rates would translate into significant losses for them.
When asked by Channel NewsAsia how confident is the company in terms of convincing stakeholders to back them up given the low return rates, the financial advisor replied: “We know that the outcome is very difficult given the size of potential losses. However, we do think this is the best option that we have … and it is much better than the alternative (of) liquidation.”
Hyflux had previously said that in a liquidation scenario, senior unsecured creditors can expect returns of about 3.8 to 8.7 per cent. However, those holding on to perpetual securities and preference shares would not be able to recover a single cent.
Advisors stressed that SM Investments – made up of Indonesian conglomerate Salim Group and energy giant Medco Group – is a “serious investor” looking to grow its investments, and has complementary strengths with extensive involvements in the water and power sectors.
The Indonesian consortium also has “financial firepower”.
“With their existing business connections and synergies they can bring to existing businesses of Hyflux, we think they are a very good partner to walk forward with and their offer was the best that we received,” he said.
Advisors also said Hyflux “will be almost debt-free” post-restructuring, save for some “secured bank debt” on the Tuaspring Integrated Water and Power Plant and some other assets.
This leaves the company with a “much stronger balance sheet”, alongside support from a “strong, strategic partner”.
“One can be sure that the investors are looking to grow their investments over the years so the hope for (retail investors when it comes to the) equity portion is that they have an opportunity to ride along with the Salim Group, and hopefully recover all of their money in the future,” said the advisor.
“This is like a day-1 return. If people don’t sell their equity immediately, then there’s the prospect that it could get better over time.”
READ: Hyflux says it remains committed to ‘fair’ restructuring plan as worries among retail investors grow
WHAT HAPPENS NEXT
Following Saturday’s announcement, Hyflux has a packed schedule ahead as the clock ticks down to an Apr 16 deadline it has with SM Investments. The company’s court-sanctioned moratorium ends on Apr 30.
First up is a court hearing on Feb 21 for its application to convene a scheme meeting with all creditors. If approved, it will proceed with a scheme meeting on Apr 5.
To pass, the scheme will need to be approved by at least 50 per cent in number and 75 per cent in value of each creditor class. “If one class fails, the scheme fails,” said Hyflux’s legal advisor.
Hyflux will also hold its third round of town hall meetings with holders of its notes, perpetual securities and preferences shares, as well as ordinary shares on Mar 13.
Channel NewsAsia has also reported that an “independent” investor-only town hall session is being planned. Details will be confirmed by the Securities Investors Association Singapore (SIAS) in coming days.