‘Painful Process’ Stings Hyflux Investors Facing Near-Total Loss
Late Night Meeting Flags Hyflux Investors’ Struggle to Lose Less
(Bloomberg) -- Singaporean retiree P.K. Goh usually spends his evenings doing housework or enjoying his craft making miniature art from bottle caps. But on Monday, he sat in a windowless hall of a downtown convention center until past 10:00 p.m., contemplating a personal investment gone bad.
Goh is among investors in struggling water treatment firm Hyflux Ltd. who’d joined a town hall with the company’s suitor, Middle Eastern utility Utico FZC. The mood was business-like but permeated with the understanding that even in the best of circumstances, the investors face near-total losses.
Hyflux was once a high-flying symbol of Singapore’s entrepreneurial might before a stumble in 2018 made it the city-state’s highest-profile distressed debt case. The fall has left some 34,000 retail investors in the lurch and prompted a rare public protest in Singapore. Utico reached a deal in November to rescue Hyflux, but needs investor approval and has threatened to walk away if it can’t win support.
“It’s been a tiring and painful process with little hope of a slightly bigger recovery,” Goh said. “For retirees like me, it wipes out a good fraction of our savings and we have little runway to work to shore up those savings.”
Goh said he’d invested about S$51,000 ($37,800) in Hyflux perpetual notes and preference shares. He expects he could likely recover only 3%-6% of his investment if the Utico deal went ahead, but said he saw no viable alternative.
Hyflux’s problems began in recent years with an ill-timed expansion into the energy-production business, which has struggled with overcapacity after market liberalization. The company began a court-supervised reorganization process more than 18 months ago.
Investors have been left facing more uncertainty after a mystery rival suitor called Aqua Munda Pte made a surprise offer last month to buy the company’s debt.
As the two companies are locked in a battle for control of Hyflux, there’s still no clear timeline on when the debt of the noteholders will get settled.
Hyflux has sought another three-month extension of its debt moratorium, one in the series of many since the court-supervised restructuring process started in May 2018.
Hyflux is taking too long to close the deal and this has led Utico to plan to make payment to noteholders in two parts, the Middle East utility’s CEO Richard Menezes said in one of the town halls.
The Hyflux deal may get delayed further if shareholders start bargaining about the price, he said. Utico is more hopeful about the senior creditors -- including banks and medium-term note holders -- approving the deal, Menezes said.
Among the preference shareholders and perpetual note investors, which rank lower in payment priority to senior creditors, Utico is confident of securing the minimum 50% majority, partly needed to approve the deal.
Utico also needs approval of at least 75% of the total value of perpetual note and preference shareholdings for the passage of deal. Menezes expects it may get 60% and the rest will depend on how many big investors vote for the deal.
To contact the reporter on this story: Ameya Karve in Singapore at akarve@bloomberg.net
To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Denise Wee
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