SINGAPORE: Embattled water treatment firm Hyflux on Saturday (Feb 16) morning announced its closely-watched restructuring plan which it said would help to resuscitate the company, but retail investors told Channel NewsAsia that this will see them suffering massive losses.
According to an affidavit filed by founder-CEO Olivia Lum to the High Court on Friday, holders of Hyflux’s perpetual securities and preference shares will be allocated a cash payout of S$27 million and 10.26 per cent of the company’s shares post-restructuring.
The latter includes a “top-up” of 1.26 per cent from Ms 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.
This large group of 34,000 retail investors are owed S$900 million, and have been worried about the possibility of steep haircuts given that they are at the bottom of the priority list.
Saturday’s announcement confirmed their earlier worries.
A retail investor told Channel NewsAsia that based on her own calculations, she could see a cash writedown of as much as "97 per cent".
"I had prepared myself for a big writedown on cash, but (this) is too much to swallow,” Ms Violet Seow said.
“We invested in preference shares and perpetual securities for the regular cash dividend and interest yields. New Hyflux will not be able to issue dividends for a while and the share price is expected to crash when trading resumes,” said the retail investor, who declined to reveal how much she has invested for fear of letting her family know.
“The shares are meaningless to me.”
On whether the just-announced contribution from Ms Lum and the company’s board will help, an angry Ms Seow said the company’s top executives can do more, such as taking a pay cut.
“In dire times like this when the company is so short of cash, I am shocked that they deem pay freeze and no variable bonus as sufficient sacrifice. I don't believe that they feel our pain.”
Echoing that, another retail investor Martin Lee said: “It’s a good gesture (from the board) but unfortunately, investors are still looking at a big haircut.”
Meanwhile, under the proposed restructuring plan, unsecured creditors will receive S$232 million in cash and 27 per cent of shares. This group includes Hyflux’s medium-term noteholders who are owed S$271 million.
For ordinary shareholders, they will be given 2.74 per cent of the company’s shares.
Trade creditors of Hyflux's subsidiaries – Hydrochem, Hyflux Engineering and Hyflux Membrane Manufacturing – will be allocated S$13 million in cash to satisfy all claims.
SM Investments – the Indonesian consortium which offered Hyflux a S$530 million lifeline last October – will get 60 per cent of the company post-restructuring.
Ms Lum, in her affidavit, said the proposed scheme hopes to, among others, provide better returns for scheme parties who may be entitled to lesser returns in an enforcement scenario, and allow Hyflux’s businesses “to be revitalised and continue as a going concern from a larger and stronger platform”.
It is also intended for an “orderly” restructuring, and avoid “a free-for-all, catch-as-catch-can situation resulting from disparate proceedings within and across jurisdictions in which the Hyflux Group operates”.
The founder-CEO said the strategic partnership with SM Investments has been “carefully considered” by the company and is in the “best interests” of all parties.
“The Board took into serious consideration each of the offers on the table,” according to the Feb 15 affidavit.
READ: Hyflux says it remains committed to ‘fair’ restructuring plan as worries among retail investors grow
“The investor's offer had taken into account the liabilities within the Hyflux Group, which was in excess of S$2.4 billion at the start of this reorganisation process, the existing assets and the potential funds needed to rehabilitate the business given the prevailing market conditions as well as the capital intensive nature of the business and upkeep of the Hyflux Group's assets.”
Ms Lum said she understands that “there will be no further upward revision” to SM Investments’ offer.
The company’s board will consider “any better offer made by any other party” before the proposed scheme meetings, but no other offers have been made to date, she added.
Hyflux’s chief, who has been in the hot seat since the water treatment firm she founded in 1989 unexpectedly filed for bankruptcy protection last May, said the returns for investors under the proposed plan will likely be higher than that in a liquidation scenario.
The company has previously said that in a liquidation scenario, senior unsecured creditors can expect returns of about 3.8 to 8.7 per cent. Those holding on to perpetual securities and preference share will, however, not be able to recover a single cent.
“Due to the financing structure for the project investments … in the event of liquidation, very little, if any, of any proceeds realisable by a sale of the Hyflux Group's assets would be available to be applied towards the settlement of subordinated obligations at the Hyflux level and the estimated recovery for the holders of the debt securities claims is likely to be none,” the affidavit said.