Date: April 30, 2020
Comparison between SMI and Utico deal
Question 1: Is this worse than the Salim deal for P&P?
Question 2: In the SMI deal, the total was over $500m. Now Utico is only offering $400m. Is this a good deal?”
Answers to Question 1 and Question 2
The recovery to P&P Holders under the Utico deal varies depending on the value of holdings and on the Options elected by individual P&P Holders. We are therefore unable to do a like-for-like comparison between the Utico and SMI deals. In any event, the SMI deal is no longer on the table, and no other potential investor (i.e., Aqua Munda, Longview International Holdings or FCC Aqualia) has made an offer to the P&P Holders.
Financial status of Hyflux
Question 3: Any viable option to keep Hyflux as a going concern and defer P&P coupon payment. Nicky Tan was brought in to help to optimise shareholders. Olivia Lum promises to put all her best to help P&P holders?
Answer
SIAS and its advisors are not privy to Hyflux's day-to-day operations and management and are accordingly unable to advise on the possible options (if any) to keep Hyflux as a going concern.
However, based on Hyflux's financial position as at 31 January 2020 disclosed in the Explanatory Statement, Hyflux is currently in a net liability position (after the company made an impairment provision), even if the P&Ps are kept at their current form, these financial obligations will not be repaid and the Perpetual Capital Securities and Preference Shares will have a negative value.
Further, Hyflux requires fresh funds for its working capital in order to survive. Without the investment by Utico or any other investor, the Hyflux Group’s debts cannot be restructured and Hyflux will likely be placed into liquidation. Under such circumstances, the P&Ps will have to be fully written off and non-recoverable given Hyflux's net liability position (i.e., there will not be sufficient assets to give P&Ps any recovery).
For any investor to inject fresh funds, it is not unusual for it to make the investment conditional on all debts and obligations being fully and finally waived or extinguished.
Question 4: Could you help to give us a snapshot what the assets for Hyflux and the progress of TuasOne Waste-to-Energy Plant. By surrendering the Tuaspring Power plant to Maybank, has Hyflux free themselves from the debt liability
Answer
SIAS and its advisors are not in a position to provide a list of Hyflux's assets. With respect to the status of the TuasOne Waste-to Energy Plant, P&Ps may wish to refer to the following announcement released by Hyflux on 26 December 2019 (http://investors.hyflux.com/news.html/id/753077)
Maybank appointed a receiver and manager over the Tuaspring plant by exercising its security rights. The company did not surrender the plant to Maybank.
In the event that Maybank is not fully repaid from the sale proceeds of the Tuaspring plant, it will still have a residual claim against Hyflux under the Scheme.
Question 5: How come the valuation of Tuas Spring can suddenly disappear by $1 billion? Why is Hyflux allowed to release fake (/obsolete) valuations of its assets to deceive investors?
Answer
SIAS and its advisors are not in a position to comment at this time.
Question 6: Are the proceeds from the offer sufficient to pay off all creditors?
Answer
The creditors will be paid out only to the extent that is being offered to participating Scheme creditors under the Scheme provided that Utico makes good its commitment under the proposed investment. In this regard, SIAS has highlighted some of its concerns on the guarantee and share pledge to be provided by Utico on several occasions and Utico has addressed some of these concerns.
Question 7: Why isn't a pro-forma financial statements taking into account for offers available for shareholders & P&P security holders to assess whether to take up the offer by Utico?
Answer
Based on EY's liquidation analysis, P&Ps and shareholders will get nil recovery.
Under the Utico deal, the recovery for individual P&P Holders will depend on whether they elect Option 1 or Option 2 and their value of holdings.
Individual P&P Holders will have to assess the offers and decide whether to vote yes or no for the Scheme themselves.
Options for P&Ps
Question 8: Will you explain the hyflux 3.5％ share?
Answer
If the Scheme passes, P&P Holders who opt for Option 2 will get up to 3.5% of Hyflux subject to the Reduction Formula.
Under the Scheme, P&P Holders who elect Option 2 will receive an equity distribution of 0.58 ordinary share in Hyflux per P&P Claim of S$1.
For example, 2,900 of Hyflux’s shares will be allotted and distributed to the P&P holder with S$5k claim [5k x 0.58 shares].
Equity distribution will be made 18 months from the RED, following the issuance of T2 shares to Utico. Shares shall be credited to the CDP account of each P&P holder.
Question 9: If under Restructuring agreement, how much can P & P get at that time?
Answer
Recovery to individual P&P holders will depend on the Option they elect and the value of their holdings.
Please refer to question 16 to 19 for a breakdown on Option 1 and Option 2.
Question 10: I suppose there in no value for shares withheld and that is assumed to be total loss to the investor? To my question w.r.t. shares, I mean Hyflux stocks someone is holding? The stock withheld with investor basically has no value is there is no settlement talks on number of stocks holders.
Answer
SIAS and its advisors are unable to comment on the value of the shares of a post-restructured Hyflux. The intention of the investor is to progressively release the shares withheld as the deferred payments are being made.
Question 11: What happens when no option is approved?
Answer
If the Scheme passes, but the P&P holder has not voted or has voted against the Scheme, the default option is Option 1. If the Scheme does not pass, the proposal to P&Ps will not proceed.
Question 12: What is the worst-case situation for P&P Holders?
Answer
Unless there is another proposal by an investor, Hyflux is likely to be placed into liquidation if the Scheme does not pass. EY has estimated in a liquidation scenario there will be no recovery to P&Ps.
Question 13: What's the price of the new share to be issued should the scheme passed?
Answer
Utico will be subscribing for 95% of the enlarged equity of Hyflux for S$300M. Given 14,920,414,391 will be issued to Utico, this will translate to an issue price of S$0.0201 per share.
We are unable to comment on the future value of Hyflux’s share price.
Question 14: Should the scheme not passed, is the restructuring by judiciary a better option, in your opinion?
Answer
We assume you are referring to a Judicial Management. There is no guarantee that placing Hyflux under Judicial Management would lead to a better recovery for the P&P Holders. Whether P&P Holders achieve a better recovery turns more heavily on the deal that the potential investor is prepared to offer, than the mode of the restructuring.
Typically, a consensual restructuring will provide the creditors with a better recovery than under a judicial management or liquidation. In this instance, there will be no recovery to P&Ps unless unsecured creditors are fully repaid.
Question 15: What is the value of Utico? Since we are getting its shares?
Answer
SIAS and its advisors are unable to advise on Utico's valuation given that Utico has refused to provide SIAS and its advisors with its financial information despite numerous and repeated requests.
In any event, P&P Holders will not be receiving shares in Utico. If the Scheme passes, P&P holders who have elected for Option 2 will receive up to 3.5% of Hyflux's enlarged post-restructured shares, as well as to share on a pro-rata basis up to 4% of the cash value of Utico if it successfully undergoes an IPO.
Question 16: Are the proceeds from the offer sufficient to pay off all creditors?
Question 17: For option 2, how much we can get back for every $10k invested in both the P&P shares?
Question 18: If we opt for option 2 what is the estimated amount a perpetual holder will be able to receive if he has more than 300000pp shares?
Question 19: Can you go through again the estimated amount under option 2 for those who holds 600000 pp shares?
Answers to Question 16 - Question 19
Option 1 - S$1,500 or 50% of investment amount, whichever is lower.
Option 2 - 3 avenues of recoveries:
(1) S$1,500 or 50% of investment amount, whichever is lower;
(2) Share in higher of S$50M or 4% cash value of Utico, as adjusted to reflect % of P&Ps who elect Option 2; and
(3) Share in up to 3.5% of Hyflux.
Question 20: Who will select item a, b or c under option 2? P&P or Utico?
Answer
The P&P holders will make their choice under the Scheme. If they elect for Option 2, they will be entitled to all the items (a), (b) and (c) under Option 2.
Question 21: If we choose option 2, do we have to further choose option 2a or 2b or 2c either now or later?
Answer
No. P&Ps who elect Option 2 will receive payments under 2(a), 2(b) and shares under 2(c).
Question 22: If we have PnP with CDP SRS (banks) and CPFI account, will we be treated as having 3 accounts for the purpose of the payment i.e. for option 1 ($1500 for each account - a total of S$4500 for the 3 accounts)
Question 23: If I hold both Perpetuals and Preference shares in CDP, and choose Option 1, will I get $1500 or $3000 in total?
Question 24: Each holder is determined by account number? the the person with 10 CDP accounts will have better recovery % than person with same holdings amount but all in one account.
Question 25: If i hold both the preference and perpetual shares plus having them under cash, srs and cpf. Are they aggregated for the option choice or are each counted separately?
Question 26: I own PnP under different nominees (bank, CPF, SRS), am I considered as one entity/owner?
Question 27: I am a holder of Hyflux BTWZ via CDP, I also hold this security via SCB. Beside these two accounts, I also have Hyflux (N2H) bought using CPF and SRS fund. If I vote yes and choose option 1, may I know whether I will receive $6,000 i.e. $1,500 x 4?
Answer to Question 22 - Question 27
For the purpose of participation under the Scheme, P&P Holders who hold multiple accounts of Perpetual Capital Securities and Preference Shares will have the value of their holdings aggregated into 1 claim.
Question 28: For option 1, how much can a investor get back per $10k invested for each holding of P&P share?
Answer
P&P holders who elect Option 1 will be entitled to S$1,500 or 50% of investment amount, whichever is lower.
For example, if an investor holds S$10k, he will receive an upfront cash payout of S$1.5k under Option 1.
Question 29: For option 2, are those options legally binding? meaning if any options not met, can we take action against Utico?
Question 30: If we choose option 2 and the scheme is successful, and Utico did not fulfill the conditions eg. default on payments say 1 year later, what would be our options?
Question 31: In the event the offer goes through, but Utico do not have the means to pay, what will happen? Do they still have the company other assets?
Answer to Question 29 to Question 31
The Notes Trustee for the P&Ps can exercise its rights to the guarantee provided by Utico FZC and Utico SG and share charge for the benefit of the P&Ps if there is an event of default once the Unsecured Scheme Parties are fully paid.
Once the Scheme is effective, the directors would be released from their liabilities and no actions may be taken against the directors.
Question 32: For option 2, is there interest payment for the deferred paments in option 2a, as the material only shows interest payments for 2b?
Answer
Yes, there will be Interest of 1.25% p.a. for deferred payments under Option 2(a)
Question 33: For P&P holders holding the notes at a financial intermediary (instead of a CDP a/c), which in turn holds the securities via a nominee custodian company (does not know the identity of the beneficiary owner), how does Hyflux determine the number of P&Ps?
Answer
Hyflux and Utico have previously stated that they will determine the beneficial owners of P&Ps on a look-through basis. While we have sought further clarification from both Hyflux and Utico on their intended approach to cases where such beneficial ownership cannot be determined, we are still awaiting Hyflux and Utico's response.
Voting
Question 34: When and how the proxy form be sent to us?
Question 35: Are we going to receive any scheme voting via mail? or must we go and find it on SGX website?
Answer to Question 34 and Question 35
Proxy Form is appended as Appendix D in the Explanatory Statement to the Scheme Documents.
If you are a sub-account holder (i.e. you are holding through a Relevant Intermediary such as a private bank, broker or nominee), please contact your Relevant Intermediary for instructions on obtaining a copy of the Proxy Form and submitting a copy of the same for purposes of appointing a proxy.
Question 36: If my agent bank (SRS account) holds my PNP, n they are usually late in sending documents to holder, could I download the proxy form, fill up my option and send it to Hyflux? I do not want to wait for forms and they arrive late.
Answer
You may fill up the Proxy Form at Appendix D in the Explanatory Statement to the Scheme Documents and submit to the relevant intermediaries.
Question 37: When do we need to vote for the new directions that Hyflux going to proceed?
Answer
Scheme Meeting to vote for the Hyflux Scheme was originally scheduled on 22 April 2020. The Court has granted the postponement of Scheme Meeting in light of the Covid-19 situation to a later date to be decided. A pre-trial conference for directions to be given on the Scheme Meeting has been fixed on 14 May 2020.
Question 38: What happens if I do not vote at all?
Answer
If a P&P Holder fails to make an election on or before the date of the Scheme Meeting, or does not vote in favour of the Scheme, and if the Scheme passes, the default option will be Option 1.
Question 39: If I am overseas, what should I do to appoint someone to vote on my behalf?
Answer
If you are the registered holder of the P&P (i.e., you do not hold the P&P through any relevant intermediary) and are unable to attend the Scheme Meeting but want somebody else to vote on your behalf, you can appoint one (1) proxy to attend and vote at the Scheme Meeting on your behalf. To appoint a proxy, the relevant Proxy Form must be completed and returned to the address specified in the relevant Proxy Form.
If you are unable to find somebody else to vote on your behalf, you may appoint the Chairman of the Scheme Meeting as your proxy to vote according to how you wish to exercise your vote. To appoint the Chairman as your proxy, the relevant Proxy Form must be completed and returned to the address specified in the relevant Proxy Form.
If you are a sub-account holder (i.e. you are holding through a Relevant Intermediary such as a private bank, broker or nominee), please contact your Relevant Intermediary for instructions on obtaining a copy of the Proxy Form and submitting a copy of the same for purposes of appointing a proxy.
Question 40: Is there a minimum number of security holders to turn up for the voting to proceed?
Answer
No requirement on number of voters to commence voting. As long as >50% in number (present and voting) and 75% in value vote in favour of the Scheme, the Scheme is deemed to have passed.
Question 41: If the voting is via a virtual mtg, how do we vote? How is the identity of the voters be determined?
Answer
SIAS and its advisors have sought clarification on these points with Hyflux and are awaiting Hyflux's response.
Question 42: If the scheme fails to pass the votes required, what happens after that? will hyflux go into liquidation?
Question 43: Even if I vote in favour of either options but the scheme falls through, I can still be allowed to pursue legal proceeding if I choose to? Can SIAS help us pursue legal proceeding on behalf of P&Ps given the lack of legal and financial abilities of retail investors?
Answer to Question 42 and Question 43
In the event that the Scheme does not pass, all creditors will have the ability to make applications to the Court to place the company into liquidation. However, please note that there is a pending application made by the Unsecured Scheme Parties to place Hyflux into Judicial Management, and whether Hyflux is placed into liquidation depends on the outcome of the application to place Hyflux into Judicial Management.
Individual P&Ps should seek their own legal advice should they wish to pursue any legal action against the Hyflux Board.
Question 44: When will the result of the voting be known?
Answer
Scheme Meeting to vote for the Hyflux Scheme was originally scheduled on 22 April 2020. The Court has granted the postponement of Scheme Meeting in light of the Covid-19 situation to a later date to be decided. A pre-trial conference for directions to be given on the Scheme Meeting has been fixed on 14 May 2020.
Question 45: What if shareholder voted against whatever scheme proposed in EGM?
Answer
The shareholders of Hyflux are not Scheme Creditors under the Scheme, and are therefore not entitled to vote for or against the Scheme.
We therefore assume that your question relates to what happens if Hyflux’s shareholder votes against the allotment and issuance of new shares at the EGM. If Hyflux’s shareholders votes against the allotment and issuance of new shares at the EGM.
Question 46: Can I confirm that whether the scheme is passed or not is based on number of people who vote yes? Those who do not vote is not counted right?
Answer
That is correct. As long as >50% in number (present and voting) and 75% in value vote in favour of the Scheme, the Scheme is deemed to have passed. This is why every vote count and your vote is important.
Security package
Question 47: Do the secured creditors hold Guarantees from Directors?
Answer
There are no secured creditors whose debts would be compromise under the Scheme. All participating creditors under the Scheme are unsecured creditors and do not hold any guarantees from the directors.
Key Issues of Utico Deal
Question 48: Is Olivia Lum giving up her shares?
Answer
OL and Hyflux Board have not offered their ordinary shares and entitlement from their holdings of perpetual capital securities and preference shares in Hyflux to the P&P Holders as part of the Hyflux Scheme.
Question 49: I am not happy how P&Ps are treated. I want to sue the directors! All my investment is lost. How else can I get my investment back?
Answer
Based on EY's liquidation analysis, P&P Holders and shareholders will get nil recovery.
Without the injection of new funds from the other investors, Hyflux Group’s debts cannot be restructured and Hyflux will likely be placed into liquidation by creditors upon the expiry of moratorium.
Individual P&Ps should seek their own legal advice should they wish to pursue any legal action against the Hyflux Board. P&P Holders should note that, in the event that the Scheme passes, any potential claims that they may have against Hyflux Ltd and the Hyflux Board will be released and cannot be pursued.
Question 50: Has Hyflux carried out DD for UTICO satisfactorily? SIAS - P&P could not do. If the former is not done, then who we are voting to take over the company?
Answer
SIAS and its advisors are not privy to the due diligence conducted by Hyflux on Utico (if any) and/or the outcome of the said due diligence exercise. In this regard, SIAS has repeatedly asked for due diligence rights on Utico, but Utico refused to grant such rights to SIAS' advisors.
Question 51: Regarding your slide that "Scheme Parties will not be allowed to commence any legal proceedings against Hyflux directors for any acts or omissions committed prior to the Scheme". Can you help us to understand why those PnPs who have voted No, are not allowed to sue? Is this legal, isn't our rights compromised.? How can SIAS’s Lawyers help us understand this? Thanks
Answer
Where the Scheme is approved by the requisite majorities of the Scheme Creditors and sanctioned by the Court, it becomes binding on, among other parties, all P&Ps, including those P&Ps who have voted against the Scheme. Should the release clause remain in the Scheme, all P&Ps will be bound by the release clause and cannot commence any legal proceedings against Hyflux directors for any acts or omissions committed prior to the Scheme.
Question 52: What can P&Ps do before voting to apply for this clause on suing to be removed since most of us view this to be unfair? Can SIAS / legal help to highlight this to the courts and press?
Answer
SIAS and its advisors had requested this on numerous occasions. However, this is not reflected in the Scheme.
Question 53: Is Utico a public listed company? isn't there any financial report?
Answer
Utico is not a public listed company. As such, there are no publicly available financial reports for Utico.
Question 54: Will UTICO retain OL and BOD, if they win? Any commitment on that?
Answer
We are unable to speak on behalf of Utico on their future plans.
Question 55: How to justify pt 3 and 5 in Key Issues of Utico Deal, what is the base?
Answer
This was discussed and negotiated between Hyflux and Utico.
Point 3: "Scheme Parties will not be allowed to commence any legal proceedings against Hyflux’s directors for any acts or omissions committed prior to the Scheme."
Point 5: "If the Scheme passes, P&Ps who vote no or do not vote shall be deemed to have elected Option 1."
SIAS has repeatedly asked for these clauses to be removed from the Scheme Document, but Hyflux has refused to delete the same.
Question 56: In your opinion, how credible and how certain is Utico to honor the payment should option 2 be selected?
Answer
We are unable to comment on Utico’s ability to make the required payments under the Scheme as we have not been granted access rights for due diligence on Utico despite numerous requests.
The Notes Trustee for the P&Ps can exercise its rights to the guarantee provided by Utico FZC and Utico SG and share charge for the benefit of the P&Ps if there is an event of default once the Unsecured Scheme Parties are fully paid.
Cram down
Question 57: Can you explain more about the clamp down? You said it depends on the percentage, how so? In view of the clamp down rule, can we know how much value in total the other creditor class (other than PnP) hold?
Answer
The aggregate outstanding amount of all Unsecured Scheme Claims is approximately S$1.66 billion.
The aggregate outstanding amount of all Subordinated Claims is approximately S$112 million.
For the statutory cram down mechanism to be invoked, the following requirements have to be met:
(a) First, 75% in value and 50% in number of creditors present and voting in at least one class of creditors have voted in favour of the Scheme (i.e. one of the meetings of the P&Ps, the Unsecured Scheme Parties and the Subordinated Scheme Parties);
(b) Second, the creditors who voted in favour of the Scheme represent 50% in number and 75% in value of the creditors present and voting at the scheme meetings;
(c) Third, the Court must be satisfied that a cram down is fair and equitable to each dissenting class of creditors. Broadly speaking, this would be the case where (i) (a) no creditor in the dissenting class(es) receives, under the terms of the scheme, an amount that is lower than what the creditor is estimated by the Court to receive in the most likely scenario if the scheme was not passed (likely liquidation) and (ii) (b) the scheme does not provide for any creditor with a claim that is subordinate to the claim of a creditor in that dissenting class, or any member, to receive or retain any property on account of the subordinate claim or the member’s interest.
Classification of creditor classes
Question 58: Under the law, is it equitable for investors in the same class and ranking to be paid differently favoring the small investors?
Answer
There have been reported Singapore cases where creditors who had differing rates of recoveries ranging from between 15% and 89% under the proposed scheme were put into the same class for voting purposes.
Question 59: Isn't classification done by debt type rather than recovery rate?
Answer
The classification of creditors for purposes of voting at the scheme meeting(s) will depend on the application of the dissimilarity principle. Broadly speaking, creditors whose rights are so dissimilar that they cannot sensibly consult together with a view to their common interest will be put into separate classes for voting purposes. The Court may take into account the debt types and recovery rates of the creditors in applying the dissimilarity principle.
Potential investors
Question 60: Will Hyflux share more information on the other potential investors before the Scheme Meeting?
Answer
Hyflux has indicated that they would provide more information as and when it becomes available.
Question 61: Who is the owner of Longview?
Answer
On 19 Feb 2020, Longview International Holdings Pte Ltd (“Longview”) expressed its interest to invest in Hyflux together with a joint venture partner, an undisclosed major Chinese entity. We have no other information on the ownership of Longview.
Advisors fees
Question 62: Does SIAS get any of the fees paid to advisors?
Answer
No advisor fees will be paid to SIAS.
Question 63: Q to Blossom: can the Hyflux investors ask the court to address canine the correctness of the basis for paying success fee of 25 mil to its advisor?
Question 64: Is it fair to pay 25 milion to Nicky Tan (the advisor), on what basis did the board agree to pay?
Question 65: What is the advisory fee all about? Who is paying this $50m?
Answer to Question 63 to Question 65
SIAS and its advisors are unable to comment on whether nTan's engagement or remuneration was fair. P&P Holders may wish to refer to clauses 12.10 and 12.11 of the Explanatory Statement for Hyflux's justification of nTan's engagement and remuneration.
Advisors' fees refer to the professional and legal fees incurred by Hyflux's creditors in connection with the Utico deal. Part of the advisors' fees will be paid by Utico out of the remaining balance of the Investment Amount and Working Capital Line (after repaying the Unsecured Scheme Parties and Option 1 and tranche 1 of Option 2 for the P&P Holders).
Others
Question 66: The visual and sound quality of the slides is poor. Will the slides be shared after the call? I can't see the words/numbers properly.
Answer
Technical issues had been addressed in the subsequent webinars. Presentation slides will not be shared with the P&Ps as the slides are incomplete without the accompanying verbal commentary during the webinar.
P&P Holders may contact SIAS should they have additional questions or require clarification.
