SINGAPORE: Since the Hyflux debt restructuring plan offers "reluctance and fairness" to its small stakeholders, the Singapore Stock Investors Association (SIAS) said Thursday (February 28) that it presented an alternative proposal to search for a fair deal.
In a three-letter letter signed by its president, David Gerald, the defense group of investors said that the rescue proposal announced on February 16 "clearly favors" unprecedented creditors who include banks and notable entities that "will enjoy everything reverse of restructuring ".
This leaves "adverse implications" for investors of the "subordinate" perpetual securities and preferential shares of Hyflux: a large group of 34,000 people, with many retail investors, said SIAS.
According to the current proposal, this group with claims of S $ 900 million in total, was assigned a cash payment of S $ 27 million and a 10.26 percent of the company's quotas after restructuring. This translates into a recovery rate of only 10.7 percent in cash and assets.
Meanwhile, unsecured creditors face a recovery rate of 24.6 percent after allocating S $ 232 million in cash and 27 percent of the shares.
But this rate can rise if contingent liabilities, such as liquidated damages in a construction project, do not crystallize.
If this happens, 80 percent of the restructuring right of the contingent claim, which will be kept in custody, will be distributed to banks and notable entities, according to a court statement filed on February 15.
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This, along with other terms of the scheme, is unacceptable, SIAS said, citing comments that their independent advisors have obtained from meetings with the informal steering committee and other minority retail and preferred shareholder values.
In the letter addressed to the board of Hyflux, he wrote: "In very minimal, any return above the expected liquidation recovery of 8.7 percent to unsecured claims must be distributed proportionally between unsecured loans and P & Pss.
"If unsafe claims receive a return of x percent more than 8.7 percent, P & PS should receive the same increase in the return of x percent."
The letter added that if no contingent claim is crystallized, the recovery attributed to such contingent claim, including the claim of S $ 230 million held by Mitsubishi Heavy Industries, should be "proportionally distributed" between the two creditor groups.
In a separate email, Mr. Gerald has prepared: "The reason for this proposal is because a large number of P & Ps is not happy that the current offer is not fair and that they receive too little."
For example, the cashback proposal of 3% is a "small fraction of the original original".
Hyflux did not provide sufficient financial information for the interested parties to "value significantly" the value of the shares that are being assigned under restructuring.
"It follows that even after the restructuring process, P & PS will continue stagnant with a considerable uncertainty as to return its investments in the foreseeable future."
Nor was there information about the identities of those who will receive the management payment.
"This is particularly worrying because the sum allocated to these recipients reaches approximately S $ 18.8 million in the event that all contingent claims are not crystallized," the letter wrote.
"Our proposal now is to provide P & Ps a little more, which requires the approval of other classes of investors," added Mr.
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The head of SIAS said he gave the alternative proposal to the Hyflux board during a meeting on Wednesday afternoon.
He added: "Without a satisfactory answer on the issues discussed above, we believe that P & P is highly likely to waive the insignificant and equitable return that is currently envisaged in the Hyflux Scheme and that they vote against their acceptance."
Mr. Gerald urged all interested parties to consider the resolution proposal "win and win" and respond on March 8.
When contacted, Hyflux said that the proposal "has been communicated to the non-insured lenders through advisers."
Apart from that, a group of perpetual securities and preferential shares of investors initiated a public request that asked the Government to recover the main asset of Hyflux: Tuaspring's integrated water and power plant.
Channel NewsAsia understands that investors plan to submit the petition sometime this week.