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Major Change in Our Water Policy - Did the Indonesians promise a solution for Hyflux's retail investors?
1-2 months ago, Hyflux revealed that only Sembcorp and Keppel were pre-approved by PUB to bid Tuaspring and other all foreign suitors were barred from bidding. Earlier, Bloomberg first broke the news and disclosed that Sembcorp submitted a low-ball bid which was estimated to be less than 40% of Tuaspring's book value. Accepting this offer is a nail-in-the-coffin for insolvent Hyflux.
This week, Environment and Water Resources Minister Masagos Zulkifli twisted and turned our water policy by claiming that foreign ownership of Hyflux will not affect Singapore's water security. https://www.todayonline.com/singapo...will-not-affect-spores-water-security-masagos
What Triggered the Sudden Change in Our Water Policy
Masagos was refering to the possibility of Indonesia's Salim & Medco consortium taking over Hyflux (Change-of-Control for Tuaspring) which is against PUB's earlier stand. The original pre-conditions in the Indonesian's offer hinted massive loss-absorption for Hyflux unsecured bank credits and retail bond/preference share sholders which does not benefit the state or public investors, except Hyflux's management.
On surface, Masagos' statement further dashed hopes of a state bailout but bankers and analysts are sufficiently bewildered by this major u-turn on the ‘disproportionate’ foreign ownership:
Hyflux was a pride of Singapore. Hyflux's collapse was due to her inability to refinance her debts cheaply and she is still highly-sought by Japanese and Chinese conglomerates because of the strategic utilities asset that she holds. A local government bail-out is socially-justifiable, profitable and important as neighbour, Malaysia turns volatile on water issues lately. However, the scholars repeatedly reiterate that such bail-out might send the wrong signal to the domestic corporate sector.
In the past 6-8 months, the public investors had been frustrated with Hyflux's empty promises and the government's indifference. The impact is far-reaching.
Banks are now issuing guidance to their RMs to avoid selling bonds to their clients, triggering a liquidity meltdown in local SGD bond market. There is also a saying that the recent surge in properties for auction is due to retail investors affected by Noble Group and Hyflux's defaults. A domino effect is also created when many more will have to downgrade their dwellings to patch the colossal share and bond losses to fund their retirement or kids' education. It is not just the private properties, but even HDB is affected as many Hyflux investors are commoners.
The Bias Towards the Indonesians
Now, all of the sudden, the Singapore government explained that there are safeguards in place for our water security, despite foreign ownership. If the Indonesians did not promise a rescue plan to safeguard of the retail investors, it is really hard to explain for PUB's policy change and the non-disclosures of the deal which was protested by the unsecured bankers. If there is no noble underlying-mission to bail out the retail investors, why not remove all restrictions on foreign bidders for Tuaspring or Hyflux to avoid capital-loss for the retail bondholders and preference sharers holders?
1-2 months ago, Hyflux revealed that only Sembcorp and Keppel were pre-approved by PUB to bid Tuaspring and other all foreign suitors were barred from bidding. Earlier, Bloomberg first broke the news and disclosed that Sembcorp submitted a low-ball bid which was estimated to be less than 40% of Tuaspring's book value. Accepting this offer is a nail-in-the-coffin for insolvent Hyflux.
This week, Environment and Water Resources Minister Masagos Zulkifli twisted and turned our water policy by claiming that foreign ownership of Hyflux will not affect Singapore's water security. https://www.todayonline.com/singapo...will-not-affect-spores-water-security-masagos
What Triggered the Sudden Change in Our Water Policy
Masagos was refering to the possibility of Indonesia's Salim & Medco consortium taking over Hyflux (Change-of-Control for Tuaspring) which is against PUB's earlier stand. The original pre-conditions in the Indonesian's offer hinted massive loss-absorption for Hyflux unsecured bank credits and retail bond/preference share sholders which does not benefit the state or public investors, except Hyflux's management.
On surface, Masagos' statement further dashed hopes of a state bailout but bankers and analysts are sufficiently bewildered by this major u-turn on the ‘disproportionate’ foreign ownership:
- Did Salim group promise some kind of capital protection for the 50,000 affected retail investors to qualify for the exemption? OR
- Was Olivia the "untouchable", and PUB is only interested, to protect Hyflux's management?
Hyflux was a pride of Singapore. Hyflux's collapse was due to her inability to refinance her debts cheaply and she is still highly-sought by Japanese and Chinese conglomerates because of the strategic utilities asset that she holds. A local government bail-out is socially-justifiable, profitable and important as neighbour, Malaysia turns volatile on water issues lately. However, the scholars repeatedly reiterate that such bail-out might send the wrong signal to the domestic corporate sector.
In the past 6-8 months, the public investors had been frustrated with Hyflux's empty promises and the government's indifference. The impact is far-reaching.
Banks are now issuing guidance to their RMs to avoid selling bonds to their clients, triggering a liquidity meltdown in local SGD bond market. There is also a saying that the recent surge in properties for auction is due to retail investors affected by Noble Group and Hyflux's defaults. A domino effect is also created when many more will have to downgrade their dwellings to patch the colossal share and bond losses to fund their retirement or kids' education. It is not just the private properties, but even HDB is affected as many Hyflux investors are commoners.
The Bias Towards the Indonesians
Now, all of the sudden, the Singapore government explained that there are safeguards in place for our water security, despite foreign ownership. If the Indonesians did not promise a rescue plan to safeguard of the retail investors, it is really hard to explain for PUB's policy change and the non-disclosures of the deal which was protested by the unsecured bankers. If there is no noble underlying-mission to bail out the retail investors, why not remove all restrictions on foreign bidders for Tuaspring or Hyflux to avoid capital-loss for the retail bondholders and preference sharers holders?
