Regulators Refusing to Act - Hyflux & Noble Group's Decline

[JustLikeThis]

The bargaining power seems to have been residing more of in the hands of Hyflux which has defaulted on its obligations to numerous creditors (and surviving through the grace of the Singapore Court), rather than in the hands of the White Knight that has the capital.

https://dividendpassiveincome.blogspot.com/2019/10/the-never-ending-hyflux-saga-utico-deal.html

 

[frontier]

Why is the Singapore Government turning a Blind Eye to over 50,000 affected shareholders, bondholders, perpetual securities holders and preference shareholders?

I wish to present three numbers:
Ref: https://www.straitstimes.com/business/hyflux-perp-holders-and-preference-shareholders-owed-900m

1. According to the above article, 60% of the 50,000 affected investors are owed $1.17billion (at least) = about $39,000 each
2. The remaining investors & banks are owed at least $1.78 billion (at least) = about $89,000 each
3. In another calculation, 34,000 retail investors are owed $900m in PnPs = about $26,500 each

Statistically, many individuals are affected by a mid five-figured amount. As PUB issued further warnings about TuasOne (the last gem of Hyflux), after the confiscation of Tuaspring water plant, it is undeniable that NEA/PUB plays an essential role towards to survival of Hyflux. Hyflux has footprints in China, Middle East, Africa and Singapore's infrastructural projects. There are moral obligations for the government to intervene and help Hyflux and her investors. There is nothing to be ashamed about, to seek a government assistance because this is a symbolic local brand that sank with over 50,000 investors, and it is unlikely to be a money-losing venture for the authorities. The magnitude is massive if we include the dependents of these investors.

Retail-investor sentiments are hardly considered by the management, court or restructuring team because the retail investors are ranked last in debt seniority.


Proposed Solution
A government-linked company or stat board is the best steward for all parties to move on with the restructuring. The crazy LNG contracts are ending and biggest cashflows are from Tuaspring, TuasOne and Singspring. With PUB or NEA's blessings, this is a profitable venture for any government-back acquirer with minimal tweaks on the current contracts, and being a quasi-sovereign company, the cost of financing will be extremely low for Hyflux (improving profitability for debt repayment) and acquires Hyflux's global infrastructural assets at a discount.

Assuming that Hyflux faces $3bn of debts and seeks to reduce them to move on. The acquirer can propose to switch all debts into a zero-rated bond of 12 years maturity backed by the government-linked acquirer. (no coupon payment for 12 years).

​

Proposed Zero-rated Bonds​

Par Value at Maturity: $100​

Maturity: 12 years​

Assumption Bond Price at Day 1: $25 (Maturity - Yield to Date 12.24%pa)​

Assumption Bond Price at Day 1: $50 (Maturity - Yield to Date 5.94%pa)​

Assumption Bond Price at Day 1: $75 (Maturity - Yield to Date 2.42%pa)​

Assuming the creditors offloads everything at $25 (75% discount) to the acquirer on Day 1, effectively the acquirer only paid $750m to redeem ALL $3 billion debts. This is a very attractive deal, in all likelihood, the acquirer will happily queue to buy and strike-off these newly issued 12-years bond at 75% discount. There should be little panic-selling because other than the acquirer, new investors or insurers will love to buy these newly-minted quasi-sovereign bonds for >$50 because 5.94%pa is an attractive yield. Currently, a ten-years or perpetual bonds of our GLCs are just giving 4%pa.

These bonds will likely trade between $50-75 level for many years, which in on-par with similar debts in the secondary market. Affected bankers and individuals will have enough time to contemplate about offloading them to the open market or hold-till-maturity (for 100% capital return).

In return, the acquirer gets a majority stake in Hyflux's ordinary shares.

In fact, perhaps, the acquirer need not fork out much cash. Financial advisors will guide the acquirer to raise funds by issuing another batch of shorter-dated bonds to buy the zero-rated bonds at steep-discounts.

Eg. The acquirer issues 3-5 years bonds 2-3%pa (eg. similar coupon as GLCs such as Singtel, Capitaland or universities NUS, SMU) and use the funds to buy the zero-rated bonds at $25-50 level (5.94%-12.24%pa yield), translating to an immediate paper-gain due to debt-reduction.​

A win-win for all, if the government is willing to help.
Thanks for reading.

My family and friends are prepared to wake up PAP in the next elections.

 

[frontier]

The bargaining power seems to have been residing more of in the hands of Hyflux which has defaulted on its obligations to numerous creditors (and surviving through the grace of the Singapore Court), rather than in the hands of the White Knight that has the capital.

https://dividendpassiveincome.blogspot.com/2019/10/the-never-ending-hyflux-saga-utico-deal.html

Court trying to drag it pass elections to give the affected Pnps fake hopes. Once election passes, they will proceed to kill the Pnps.

 

[JustLikeThis]

Weekend Thoughts:
Will NEA be willing to issue a 3%-bonds to exchange all of Hyflux's debts to take over the whole company?

In Aug 2018, PUB issued bonds 3.01% bonds due 2032:

• While these bonds have a long-maturity date, they trade near 100-par because these are quasi-sovereign. Retail investors can offload them at fair prices when needed and Insurers / financial institutions need a lot of these investment-grade bonds in their portfolios
• NEA sets the rules for the utilities scene in Singapore; this is most transparent way of taking over Hyflux swiftly, without prejudice or need to argue over assets valuations with bankers and less-interpreted as a government bailout as existing creditors will still suffer some losses on the unpaid-interests and (new) lower-yields for the proposed NEA bonds.
• Local investors are badly wounded by the Offshore & Marine counters, Noble Group and Hyflux bonds in the past two years. To be a global bond-centre, Singapore needs a massive issue of investment-grade bonds to inject liquidity and attract global financial institutions.

Reference from UOB:
https://www.uobgroup.com/web-resources/uobgroup/pdf/research/MSN_180221.pdf

The Singapore Budget 2018 statement lists 3 specific projects that may be funded by Infrastructure Bonds are, i.e. the National Environment Agency (NEA) will look at borrowing to finance the upcoming Integrated Waste Management Facility, the Land Transport Authority (LTA) will also look at borrowing for upcoming projects such as the KL-Singapore High Speed Rail and the JBSingapore Rapid Transit System Link and Changi Airport Group (CAG) will look at borrowing for construction of Changi Airport Terminal 5 (T5). Bear in mind that the above three highlighted projects is by no means exhaustive. Furthermore, projects to be funded via bonds need not just be of “marquee” undertaking. Thus even upgrades to existing infrastructure may also be included and thereby ensuring a continuous supply of Infrastructure Bonds.

Government cannot just rely on SGS Bonds. pursuant to the Government Securities Act and Local Treasury Bills Act, SGS issuance proceeds are paid into a Government Securities Fund, and outward payments from this fund are generally limited to the paying of interest and repayment of principal associated with SGS issuance only. In other words, the existing laws and regulations do not allow the government to spend the proceeds nor returns from SGS issuance. As such, an alternative avenue of funding has been identified and the proposal to issue Infrastructure Bonds instead of issuing more Singapore Government Bonds will increase the variety of bonds in the local market as well as increasing the transparency and accountability of such infrastructure projects.

Investor confidence on quasi-sovereign bonds are high and there should not be any uncertainty surrounding the Singapore government’s guarantee since Singapore’s has AAA credit rating accorded by various international credit ratings agencies. Specifically, there are now less than 10 countries globally that have long term AAA credit rating across all three major rating agencies Moody’s, S&P and Fitch.

GLC or stat boards can use Green Bonds to takeover Hyflux because of their control in TuasOne Waste-to-Energy plant and other water related facilities.

https://www.finews.asia/finance/29939-singapore-bankers-anticipate-stat-boards-green-bonds

 

[Filloz]

Court trying to drag it pass elections to give the affected Pnps fake hopes. Once election passes, they will proceed to kill the Pnps.

You look at ACRA, SGX, NEA and PUB's actions. Instead of punishing the conmen, Singapore punishes the conned for being conned. PERIOD

 

[Soul]

You look at ACRA, SGX, NEA and PUB's actions. Instead of punishing the conmen, Singapore punishes the conned for being conned. PERIOD

How did SIAS select those people to represent us who gave Utico a strong support?

 

[JustLikeThis]

Update - Hyflux has said that another white knight will emerge if Utico decides to bow out.
https://asia.nikkei.com/Business/Bu...faces-5-p.m.-deadline-to-accept-bailout-offer

 

[Revenger]

LOL

remember to makan utico's escrow $$$ also !

 

[JustLikeThis]

Regulators Refusing to Act
https://www.channelnewsasia.com/new...tection-sias-corporate-restructuring-12090256

SINGAPORE: Corporate restructurings can be lengthy and ugly as creditors fight for whatever that is left to go around. Retail investors who are ranked lowest on the creditors’ list and have the least bargaining power, are often left feeling helpless.

That is the case for Ms Teo who had invested a five-figure sum into Hyflux’s securities, as she watched the once-vaunted water treatment firm struggle to put together a rescue plan nearly 16 months after seeking bankruptcy protection.

A prior deal had asked small investors like her to stomach up to a 90 per cent loss on their investments. While that was later aborted when Hyflux fell out with its would-be white knight from Indonesia, it remained a rude shock. “We really felt like we were taken advantage of,” she recalled.

As the company continued its search for a new investor, Ms Teo bemoaned that meaningful updates have slowed to a trickle. In particular, Hyflux’s talks with Middle Eastern suitor Utico have dragged on for months.

“We don’t know what’s going to happen or what we can do now,” the 46-year-old told CNA.

Market experts whom CNA spoke to echoed the need for small investors to be better protected, but they mooted ideas for the formation of a separate investors group.

For investment specialist S Nallakaruppan, this should be an association with statutory powers.

Citing his experiences as an aggrieved shareholder of troubled firms like Noble and Vard Holdings, he said: “Already so injured, where will retail investors find resources to gather like-minded people and then find a lawyer to protect their rights?

“You need somebody to take charge and make requests to the company. For the company to oblige, it (the body) needs some statutory power."

National University of Singapore (NUS) associate professor and corporate-governance advocate Mak Yuen Teen suggested forming a body to arbitrate disputes between investors and companies, as well as an independent group that monitors companies and “publishes negative reports” on them and its directors.

He also gave the idea of having a body that can sue on behalf of shareholders.

 

[JustLikeThis]

BIASED SIAS

Operating as a charity, SIAS also largely raises funds through corporate funding and its annual programmes, such as the Investors’ Choice Awards. This reliance on corporate funding is another drawback in the eyes of experts.

Said Ms Stefanie Yuen Thio from TSMP Law: “Should SIAS be granted ‘official standing’ as the investors’ association de jure, listed corporates may attempt to buy ‘soft’ influence through donations and sponsorships.”

“Even in the absence of such external meddling, it would be tough for SIAS to prove its independence if, for instance, allegations are raised by stakeholders with competing interests.

Read more at https://www.channelnewsasia.com/new...tection-sias-corporate-restructuring-12090256

 

[JustLikeThis]

Retail Investors Held Hostage

Ms Yuen Thio would also like to see the laws changed to better allow retail investors to take action against errant boards.

Ms Yuen Thio cited the example of perpetual bonds or “perps”. “(These) are not really bonds in the traditional sense and a savvy investor would not invest without understanding the risks associated with a bond that the issuer has no obligation to repay.”

The issue of whether retail investors fully understood “perps” and its features was thrown up at the onset of the Hyflux saga.

“When corporates go into default, there is usually very little left to go around so the parties would be picking scraps off a carcass,” she said.

“It’s much better to arm investors with knowledge and the ability to assess potential investments so that they do not put their life savings into companies that are financially overextended or badly managed.”


Read more at https://www.channelnewsasia.com/new...tection-sias-corporate-restructuring-12090256

 

[JustLikeThis]

What kind of rubbish deal is this?

Ask you to choose Option 1 or 2 but if not enough money for Option 2, maximum payout is capped at $50m for $900m PNPs + non-guaranteed 4% of Utico if they list.
If Utico is just worth $500m, 4% is just $20m. >90% of PNP written off.

In comparison, the legal and auditor team gets guaranteed $40m.


https://asia.nikkei.com/Business/Business-deals/Hyflux-reaches-290m-deal-with-Middle-Eastern-savior

According to the restructuring scheme provided in the statement, Hyflux's unsecured debt holders such as banks will receive SG$250 million, while the retail investors will receive up to SG$50 million. The next focus, therefore, is whether or not these creditors will agree to the arrangement. If creditors vote against the scheme, Utico may terminate the restructuring agreement.

 

[JustLikeThis]

Two points to add:

1. Utico's plan to offer $1500 to each smaller investor is not legal. Utico may do it to ALL PERPS or ALL PREFS but it is illegal to make different general offers to different investors within the same creditor class.

2. Bankers are unlikely to support fully because Utico's $250m offer for them and MTN bondholders is lower than projected returns under Judicial management.

 

[Revenger]

OLIVIA HUAT LIAO !

 

[no_faith]

After oil, interested in h2o?

 

[Revenger]

HUAT AH !

 

[rotiprata]

lidat... still got so many jokers asking us to bail out OL... siao boh ???

 

[JustLikeThis]

Over 90% loss for Hyflux retail investors

https://www.zaobao.com.sg/finance/singapore/story20191127-1008629

 

[Filloz]

ALL MTN INVESTORS PLEASE TAKE NOTE!

I represent one of the three Hyflux legal groups. I spoke to our MTN legal rep yesterday night.

1. First and foremost, the earlier press release that MTN supports the proposed Utico restructuring is fake news. I REPEAT, IT IS NOT COMMUNICATED TO MOST OF US, IT IS FAKE NEWS. Utico lied about having our endorsement.

2. The breakdown on latest Utico compensation packages is also not communicated to any of us in our MTN group. Otherwise, MTN holders who got selected to represent us, should share the details.

3. Seeing that Perpetual and Preference investors is not going to have an uniform payout within their group (max $1500 or up to 50% for those with max. $3000 vested), at least two banks are trying to convince the UWG group within the unsecured senior class that bankers will get to the keep excess from unclaimed contingency liabilities, in exchange for their support. If this goes through, it is unfair to MTN. Restructuring advisors also seeking a share if they are can reduce contingency liabilities (which appeared out of thin air in the first place)

Unsecured Senior Class - MTN and Banks
Unsecured Junior Class - Perpetuals and Preference



Advisory from Legal:

1. Our legal shared that Singapore's business law have gone off the tracks due to the uneven payout proposal for Unsecured Junior Creditors. Legally speaking, payout is always same for creditors in the same class. Now, our legal have no precedence to be sure that our final payout is the same as all banks in unsecured senior group.

2. Our legal hinted (off the records) that they heard from their peers that Hyflux's Board of Directors is very keen to push through any form of restructuring as long as it is not JM. The objective is to include waivers in the restructuring to excuse all their past wrongdoings. He speculates that SIAS's demand to keep Unsecured Junior Class in the books is a plot to gradually brainwash Unsecured Junior Class to accept a Special Purpose Vehicle (SPV) which keeps them in an empty old (current) Hyflux. Doing so, can technically deny them from voting. When that happens, everyone depends on our call.

3. In the same manner, our legal advised us to UP OUR STAKES based on the principles of Utico unequal payouts to unsecured junior class, to justify our demand in court. We have a very strong case to obtain more payouts than the banks because of our massive headcounts within the Unsecured Senior Group. Please help to pass the message around to other MTN investors that we will vote No if we are not given more. This is the time that we will be heard.



These are wishful thinking by Utico and Hyflux management. I appeal all to be united to deter any unfair restructuring.
We stay united, Lawyer said that voting is likely to be after Chinese New Year
That's all we know

 

[JustLikeThis]

2. Our legal hinted (off the records) that they heard from their peers that Hyflux's Board of Directors is very keen to push through any form of restructuring as long as it is not JM. The objective is to include waivers in the restructuring to excuse all their past wrongdoings. He speculates that SIAS's demand to keep Unsecured Junior Class in the books is a plot to gradually brainwash Unsecured Junior Class to accept a Special Purpose Vehicle (SPV) which keeps them in an empty old (current) Hyflux. Doing so, can technically deny them from voting. When that happens, everyone depends on our call.

According to Debtwire, SIAS also singing praises for nTan for "relentless efforts"