4/5/2019 Angry Singapore investors to rally against Hyflux debt-restructure plan - Nikkei Asian Review

COMPANIES

Angry Singapore investors to rally against Hy ux

debt-restructure plan
Pressure mounts on Singapore government over its handling of the issue

KENTARO IWAMOTO, Nikkei staff writer

MARCH 29, 2019 10:50 JST

SINGAPORE -- Angry retail investors in stricken Singapore water treatment

company Hyflux will stage a rare public protest on Saturday against a
restructuring deal that would see them lose nearly 90% of their money.

With the Singapore government keen to contain any backlash over the
company's collapse, protesters at the rally will call on Hyflux creditors to vote
against the debt restructuring plan that is a prerequisite for a SG$530 million
($391 million) bailout by Indonesian consortium SM Investments led by Salim
Group.

“We want to get 100% of the capital,'' said one of the protest organizers, Alex,
who did not want his full name used, and who says he invested SG$100,000 in
Hyflux.

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On Thursday, SM Investments said it had become aware of "new material

information ... that significantly increases the working capital requirements" of
Hyflux, and that it was reviewing the allocation for Hyflux's working capital
requirements.

"This will, in turn, affect the amount available for settlement to creditors," SM
Investments said in the statement said.

Last week the Public Utilities Board, Singapore's water agency, said that it would
seize Hyflux’s flagship desalination plant for zero dollars if the plant could not
meet its contractual obligations under a water purchase agreement, adding to
pressure on the Singapore government over its response to the company
collapse.

"Government is ruthless,'' Alex said. "The plant itself is definitely worth

something."

Former member of parliament Eugene Tan said that such protests were rare,
with shareholder activism still in a nascent stage of development in Singapore.

"This forthcoming protest may well mark the start of a more vocal and expressive
form of activism,'' Tan, now associate professor of law at Singapore Management
University, told the Nikkei Asian Review.

"Hyflux was very much a homegrown darling of investors and investors feel that
they have been ignored, their interests marginalised amid Hyflux’s woes," he
said. "The protest is a cry for help and for the authorities to do more to protect
retail investors."

Around 34,000 Singaporeans poured a total of SG$900 million into Hyflux

perpetual bonds in 2016 and preference shares in 2011. Singaporeans were
allowed to use part of their savings in the country's mandatory social security
retirement fund to buy the preference shares.

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In a Facebook post earlier this week, Lim Tean, the founding leader of People's
Voice, a Singapore opposition party, said it was "disgraceful" how the retail
investors in Hyflux had been treated, and that for many families the financial
losses would severely affect their lifestyle.

"Once again, ordinary Singaporeans have been let down by this PAP
government,'' Lim wrote on Facebook. "Peoples Voice urge Singaporeans to
attend this important Hong Lim Park Rally to support our fellow Singaporeans
who have been hurt by their investments in Hyflux."

Still, many retail investors think the SM Investments rescue plan is the only way
to salvage Hyflux, and that if the consortium walks away from the bailout, the
only alternative would be to liquidate the company, leaving retail investors with
nothing.

For the SM Investments deal to go ahead, Hyflux needs to clear specific vote
thresholds at the April 5 meeting for each creditor class: more than 50% in
number, and 75% in terms of value. If the restructuring plan is rejected, the
company will most likely face liquidation.

Founded in 1989, Hyflux was once one of the city-stat'e star companies, with its
water treatment and desalination technologies considered crucial to Singapore's
aim of achieving water self-sufficiency.

But after borrowing heavily to fund growth and a failed foray into power
generation in 2016, Hyflux filed for court protection last May to begin a debt and
business restructuring. As of September 2018, Hyflux’s liabilities stood at some
SG$2.7 billion.

With SM Investments signalling that it may withdraw from the deal because of
the PUB’s declaration that it would seize the desalination plant, a key focus now
is whether the consortium will proceed with the proposed bailout.

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The PUB said last week that its action should not be used as the basis for
Indonesian consortium’s decision to withdraw from the rescue deal. Hyflux also
said in Tuesday’s statement that the company “remains of the view that the
[Indonesian consortium] is obliged to honor its commitment to invest under the
restructuring agreement.”

Singapore’s Securities Investors Association said in a letter to the Hyflux board

earlier this week that there were serious concerns arising from the current
uncertainty.

"Can the board advise that SMI’s proposal is still on the table and that they have
not given any reason to withdraw from the agreement,'' said SIAS president and
chief executive officer David Gerald in the letter.

"The recent PUB statement that they should not use its default notice as a reason
to walk out is causing worry to retail investors,'' Gerald said. "There is no other
option on the table."

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