Q&A from Second Noteholders Townhall Meetings

Questions marked with * were answered during the townhall meeting

Reorganisation Exercise

Restructuring Plan

*What is the repayment plan for the bond holders?
*What “full and final settlement” options are Hyflux and SMI considering for settling the Senior Unsecured Creditors’ loans?
*As a 4.25% note holder, what is Hyflux expectation from us to tolerate the % loss for our principal in order to assist Hyflux restructuring successfully? When can we expect to get our principal back?
*Information leaked in Nov suggests that noteholders will receive only 10% of their principal back and the rest in equity. Looking at the assets and liabilities of Hyflux, does this look reasonable?
What is the proposed percentage of cash and equity repayment to bond holders?
What is the determination of repayment to bondholders in equity to ensure that there is correct value since equity is subject to fluctuations?
Will the planned cash and equity paid out equals to investor full principal plus owe interest? If no, can you provide your best estimate in percentage?
How do you ensure different groups of creditors & noteholders are fairly compensated? Will one group be given preference over another?
  1. Restructuring plan still being negotiated.
  2. The parameters are that noteholders receive cash and shares.
  3. Returns would be less if noteholders take enforcement action instead.
  4. Noteholders’ priority over subordinated stakeholders will be reflected in the returns proposed for each stakeholder group under the plan.
  5. Plan will deal with all Hyflux bank debt (including contingent debt), notes, preference shares, perpetual capital securities and trade debt (including contingent debt).
  6. Noteholders’ views are being taken into account in finalizing the plan.
  7. Noteholders’ views are being communicated directly to Hyflux and through SIAS, MTN steering committee.
  8. Plan to be announced by mid-February 2019.
*What is going to happen to the missed coupon payments for the MTNs? Will they be added to the outstanding principal?
*Will the various bonds with differing maturity dates be distinguished and differently treated. Or will they all be lumped together and treated as same?
What will happen to the bonds that are maturing this year?
  1. All missed coupon payments, interests thereon, together with the principal (for series 8, 9 & 10) will be restructured as per the scheme (restructuring plan).
  2. The principal and any interest (for series 8, 9 &10) regardless of any differences in maturity dates will be treated the same under the Plan.
What is the anticipated capital structure post restructuring? How much debt if any would remain on balance sheet?
  1. The capital injection from SMI (the strategic investor) is S$400m.
  2. Post restructuring, Hyflux will be mostly debt free.
  3. Debt limited to shareholder’s loan of S$130m from SMI.
  4. The Hyflux Group will still have project finance debt at the subsidiary level.
Instead of cash and equity, have you considered extending the bonds for a period of time, at a lower coupon rate?
Has there been a proposal to extend the maturities of the MTNs / amend terms of the notes etc & keep our investments as bond holders as compared to the proposed conversion into cash + equity
  1. Extending maturity date of the notes and other Hyflux securities insufficient to rehabilitate Hyflux given current market conditions.
  2. Without any capital injection, Hyflux would be under extreme pressure to be able to continue servicing its obligations, including the notes, and meet its working capital needs. This would be the case even if payment obligations under the notes are extended and/or the coupon rate is lowered.
  3. Weak power market is not facilitative of a short-term recovery for Hyflux.
  4. Unless balance sheet is strengthened, Hyflux cannot compete optimally for projects.
  5. Postponement of financial obligations may result in the need for further rounds of restructuring in the years to come.
  6. Restructuring plan intended to effect a long-term solution.
  7. SMI’s investment is conditional on the settlement/discharge/redemption of all Notes and other Hyflux financial obligations.
*Can Salim increase its shareholder loans so that Hyflux have sufficient funds to repay the $265m noteholders in full? After all the shareholder loan will have to be repaid to Salim.
Can Salim improve the offer as the offer is far below the book value?
Isn’t Salim taking Hyflux on the cheap with $400m with all the assets intact and wiping out all the noteholders & perps and preference shareholders? We will all suffer massive haircuts
  1. SMI’s offer took into account the project finance and other debt in the Group and the funds needed to rehabilitate the business given market conditions.
  2. SMI’s current offer was after aggressive negotiation by the Board with SMI and other potential investors. The proposed investment by SMI is much higher than the offer they initially made.
  3. The various offers were assessed and SMI selected after taking into account:
    1. Value of the investment
    2. Conditions imposed by the offeror
    3. Offeror’s financial ability to complete the investment
    4. Ability to invest the funds in time given the liquidity constraints
    5. The offeror’s synergies with Hyflux that could effectively revitalize the business.
  4. SMI will not be changing their offer.
  5. At present, the best option in all the circumstances, is the proposed investment by SMI. Before the scheme meeting on the proposed investment at the end of March 2019, the Board will consider any better offer that is received. To-date no other offers have been made.
  6. In light of the liquidity crunch on the Group and the need to maintain the confidence of the relevant offtakers and complete the Projects, the restructuring should be completed by April 2019.
If the company liquidate will it have enough to pay bondholders? If not roughly what percentage please
*EY estimates a 3.8%-8% recovery in a liquidation scenario, what are haircut assumptions of major assets? What claims are included in senior unsecured?
What will be other options aside from liquidation if noteholders voted against the proposal of cash/equity conversion?
  1. The senior unsecured claims comprise:
    1. Bank debt of S$717m
    2. Notes of S$271m
    3. Contingent debt of S$915m
  2. Liquidation returns for noteholders are expected to be between 3.8% and 8.7%.
  3. Liquidation scenario takes into account:
    1. Ability of contract counterparties and government offtakers to terminate or takeover the contracts/project company and claim damages from Hyflux or impose penalties
    2. Project assets subject to bank security
    3. The performance guarantees provided by Hyflux for the EPC business which will be called upon
    4. Realization of assets in challenging jurisdictions
  4. In the absence of any better offer, there are no other options beyond SMI investment or liquidation. The Board recommends the proposed investment by SMI as the better option.
To SMI/Mr Arief Sidarto, what is SMI’s projection on the return by note holders? How long do noteholders need to wait for their capital return?
*To SMI/Mr Arief Sidarto, you obviously see that Hyflux is a good strategic fit and provides good opportunities to you. How would you see potential value in the restructured Hyflux in 5 years? How confident are you the business is viable?
  1. If the restructuring plan is accepted, Hyflux will be a company with relatively low debt and the capability to leverage on the synergies with SMI in both the water and energy industry.
  2. The shares issued to noteholders will enable them to participate in the expected growth
  3. SMI sees an overall direction for Hyflux and the underlying risks in the business.
  4. SMI’s investment track record is good and SMI is taking a long-term view of this investment.
  5. The intention is to rebuild the company as soon as possible.
 What potential issues/situations will derail the SMI investment into Hyflux?
  1. Insufficient acceptance of the restructuring plan by the various stakeholder groups (creditors and shareholders).
  2. The court’s refusal to sanction the restructuring plan approved by the stakeholders.
  3. Lack of approval from regulators and offtakers.
  4. Cessation of business or liquidation/insolvency of certain key companies within the Hyflux Group.
  5. Failure to complete the restructuring by the long-stop date in the investment agreement with SMI which is 16 April 2019.

Tuaspring and Other Assets

Tuaspring has a book value of 1.47 billion as at March last year. Sembcorp’s bid for it was rejected because it came in below book value. Isn’t Salim’s offer similarly hugely discounted and inadequate?
 What is the valuation of Tuaspring given that it is the largest asset in Hyflux?
 *What is Maybank’s position on Tuaspring given that Hyflux has announced that it will not be actively pursuing a voluntary sale?
  1. The effort to divest Tuaspring started in January 2017.
  2. DBS and CICC Bank were appointed as advisors for the divestment exercise.
  3. By August 2017, more than 50 parties had indicated an interest in Tuaspring and had been provided access to the information memorandum concerning Tuaspring following written approval to disclosure being received from PUB. This information memorandum provided high level information on the asset.
  4. As a result of this exercise, the company received several preliminary non-binding bids, all of which were subject to agreement on the investment structure, regulatory and other approvals, and completion of detailed due diligence. Three of these indicative bids attributed an enterprise value of S$1.4 bn to the Tuaspring project. These came from a PRC SOE, a private UAE party and a subsidiary of a Singapore listed company.
  5. However, these numbers were not final but subject to various conditions, investment structures and further due diligence.
  6. To conduct further due diligence (which required obtaining access to more confidential information relating to Tuaspring) and to make a binding offer, an interested party needed to be approved by PUB to be granted access to such confidential information.
  7. By May 2018, none of these parties had completed their due diligence processes, and the time required to complete such due diligence and receive an offer was likely to take a much longer period of time. With the weak electricity market not likely to recover in the near term, the Group will continue to suffer losses. As such, Hyflux decided to commence a transparent financial reorganisation supervised by the High Court of the Republic of Singapore.
  8. The effort to divest Tuaspring continued in July 2018 through a collaborative sale process with the sole secured bank lender, Maybank.
  9. Of the parties that had expressed an interest previously, only 8 requested to be pre-qualified by PUB.
  10. Of the 8 parties, only 2 local parties were pre-qualified by PUB, of which 1 submitted a conditional bid in early October 2018.
  11. This conditional bid would have been insufficient to repay Maybank.
  12. Maybank agreed to extend the relevant deadlines for the collaborative sale process but to-date no further offer has been received from the other pre-qualified local party.
  13. No further request for pre-qualification has been made by any other interested party nor have any other offers been received.
  14. The Board is duty-bound to consider any offer that is made and compare that against the proposed investment by SMI.
  15. At present, the best option in all the circumstances, is the proposed investment by SMI. Before the scheme meeting on the proposed investment at the end of March 2019, the Board will consider any better offer that is received. To-date no other offers have been made.
  16. Please also refer to the SGX announcement issued by Hyflux on 28 January 2019 regarding the Tuaspring sale process and related news reports: http://investors.hyflux.com/newsroom/20190128_161822_600_P8YLNZWOKM8HC60B.1.pdf
*What is the book value of 50% stake in PT Oasis which was sold for $30.4 million in Nov 2018? $30.4m in USD or SGD?
  1. The book value of the 50% stake in PT Oasis is S$30.4m.
 Does SMI have an immediate demand for Hyflux’s current assets which could help to improve utilisation and/or revenues? For example related to Tuaspring?
Gas supply from open market can be 3 times cheaper than the current term gas into spore. Is SMI going to optimise this for Hyflux or for some other entity?
  1. There are opportunities for collaboration and optimizing of operations that can be explored if SMI proceeds with the investment and assumes control of Hyflux.
  2. Please refer to the presentation by SMI available at https://www.hyflux.com/wp-content/uploads/2019/01/Town-hall-Meeting-presentation-for-Noteholders.pdf
 *Did Hyflux consider selling assets to PUB?
Why has Hyflux not approached Singapore government or entity such as Temasek for help since there are so many stakeholders involved, the moms and pops who will lose a lot of their hard earned savings
What is the government/PUBs stand on liquidation?
  1. Hyflux is unable to comment on behalf of the Singapore Government or any related government related entity.

Financials and Operations

*When will more financial information be disclosed, quarterly or full year, given that last update was more than half year ago.
  1. Financial information to assist stakeholders to assess the restructuring plan will be made available prior to the scheme meeting.
  2. Management accounts have been disclosed monthly since the commencement of the court-supervised reorganization process.
  3. These may be accessed at:https://www.hyflux.com/financial-reorganisation-exercise/info-on-court-process/
  4. Pursuant to extensions obtained from the SGX, Hyflux will announces its 2QFY2018 Financial Statements, 3QFY2018 Financial Statements and FY2018 Financial Statements by 30 June 2019 or before the lifting of the suspension on trading. Please refer to the announcement in the following link for more information: http://investors.hyflux.com/newsroom/20190103_000356_600_TS0X0DW43SN5BXX7.1.pdf.

Board and Management team

 How did the board allow things to get to this point? What oversight measures were in place, if at all? How will corporate governance be improved moving forward to prevent future overleveraging?
  1. The current challenges facing Hyflux are driven by the severe market conditions of the Singapore power sector. The impact has been felt by all gencos and Hyflux has not been spared. These effects have been felt since 2016 with the losses from the power business (see below links to announcements).http://investors.hyflux.com/newsroom/20170223_172020_600_PND79TKYU27E0VBZ.2.pdf http://investors.hyflux.com/newsroom/20170720_170702_600_WKHYWQ6MRMKAE76Y.1.pdf
  2. Since January 2017, a concerted effort to divest the interest in Tuaspring has been pursued to avoid further losses.
  3. Hyflux is involved in a capital intensive industry, so the nature of the business requires considerable leveraging.
  4. The Board considers investments and projects recommended by management and reviewed by industry consultants.
  5. None of the directors have any direct interest in the Group’s investment into any project.
  6. SMI is committed to ensuring strong corporate governance if it proceeds with its investment.
 To Olivia Lum: Do you think Hyflux should have slowed expansion to keep cash flow positive?
*Ms Lum is the poster girl for Singapore, Hyflux our pride. The world is watching how Hyflux treats fellow Singaporeans who had put their savings in. How do you account for your moral obligation to us?
  1. At the time, the decisions taken were considered to be in the best interest of the Group.
  2. The decision to invest in the Tuaspring project almost a decade ago in 2010 was made after careful assessment of the industry outlook and market conditions that were known and projected at the time. The power industry had a rosy outlook at that time and this project was supported by financiers and the regulatory authorities. Unlike some of the other projects, this was a Singapore based investment.
  3. The subsequent collapse of electricity prices of the Singapore wholesale market was totally unexpected by the industry players.
  4. The Board could not have predicted the extent of the losses which in turn triggered a cash crunch for the Group.
  5. Ms Lum and the rest of the Board are committed to facilitating a successful restructuring so that stakeholders have an opportunity to benefit from the growth of the restructured Hyflux.


* Will all the presentation slides shown today be emailed to us?
  1. The presentation slides are available online on SGXnet, Hyflux website and SIAS website.
*To SIAS: Has a steering committee representing the investors been formed and what action has been taken by this committee?
*How can the rest of the investors provide views and feedback to the Steering Committee?
*How do we contact the lawyers and the financial advisors?
  1. A Steering Committee for the noteholders has been formed by SIAS.
  2. Legal advisors (Akin Gump) and financial advisors (FTI Consulting) have been appointed to advise the Steering Committee.
  3. The Steering Committee advisors have been engaging with Hyflux’s advisors on the restructuring plan.
  4. Noteholders can provide feedback to the Steering Committee by contacting their advisors or SIAS.
Moratorium aside, is there a need for individual bond holder to lodge a claim, is there a time bar and is there a difference in action between holder of bonds which has already matured and maturing?
  1. All the Notes will be treated the same under the scheme regardless of maturity date.
  2. Individual noteholders should file a proof of claim or where the notes are held through nominees, ensure the nominees file the proof of claim.
  3. The deadline for filing the proof of claim is 15 February 2019 (5 p.m.).
  4. Detailed instructions on how to file a proof of claim are set out in the form downloadable at this link https://www.hyflux.com/proof-of-claims/  please also refer to the SGX announcement dated 1 February 2019.
 When is the next townhall meeting to discuss the restructured plan and how is the vote to be conducted for the restructured plan?
  1. The next town hall meeting is on 13 March 2019.
  2. The restructuring plan will be proposed by mid-February 2019.
  3. A scheme meeting for the purpose of voting on the restructuring plan will be convened if the Court grants leave to do so.
  4. If permission is granted by the Court, the scheme meeting is intended to take place on 29 March 2019.
  5. A majority in number of noteholders present and voting at the scheme meeting carrying at least 75% in value of the notes (held by those present) must approve the plan.
  6. Detailed voting instructions will be set out in the notice convening the scheme meeting.