Hyflux

The last i checked, Hyflux's market cap is just ~165mil. Salim and Co came in with a 400mil offer for a 60% controlling stake (~3-4x market price) and this seems to suggest this is an investment from a position from strength from Hyflux's standpoint. Kak Olivia seems to have a new Godfather now!

Asked by one reporter to explain how Hyflux got into the state it is in now, Ms Lum replied: "I think today is a happy day. We just caught the flu. Like what Pak Anthony Salim just told me, 'Don't worry Olivia, you just (caught a cold), it's okay'. Because the entrepreneurship will still continue, and together with two big bosses here, Hyflux will have a lot of support."

Hyflux: http://infopub.sgx.com/FileOpen/HL%20-%2...eID=530015
BT article: https://www.sgsme.sg/news/indonesian-whi...plan-table

I "love" this restructuring process!

The T&C of Salim-Medco deal is that 1) Salim-Medco will have 60% controlling stake post restructuring with the condition that bondholders (265 million), Perpetual (500 mil) and Preference shareholders (400 Mil) agree to extinguish their claims over Hyflux through a settlement

2) Hyflux has 530 million to settle with these group of stakeholders and possibly the option to give these 3 groups of stakeholders the remaining 40% stake.

3) If the deal is done, Hyflux will be granted a shareholder loan of $130 million as working capital

The godfather is forcing many stakeholders to take a very bitter pill!

How about those Preference shareholders ? How big a haircut ? Else is a nice escape !

Since Tuaspring is going to be sold at maybe a third of book value, the proceeds will not be able to repay all debt-instrument holders. And since no one is going to rescue these debt-instrument holders by buying their debt, a large part of the debt-instruments (less loans) will likely be offered to convert to equity. The restructured entity will have working capital injection from SM, so it will be viable as a going concern; a strong selling point to the debt-instrument holders. And debt-instrument holders (except banks) will accept because it is unlikely that there will be a better deal.

After Hyflux restructures, how much dilution will existing shareholders face? 50%, or more?

Pak Anthony's money will only come in after Hyflux has resructured. Shares will be issued to SM, which means a second round of dilution to shareholders. By then, the original shareholders may be left with only 5-10% or so of their original stake.

Even though SM is paying many times Hyflux's last traded price, it does not seem likely that existing shareholders will benefit from it.

Hyflux will survive, but holders of its financial instruments may not.

(20-10-2018, 12:23 PM)karlmarx Wrote: Since Tuaspring is going to be sold at maybe a third of book value, the proceeds will not be able to repay all debt-instrument holders. And since no one is going to rescue these debt-instrument holders by buying their debt, a large part of the debt-instruments (less loans) will likely be offered to convert to equity. The restructured entity will have working capital injection from SM, so it will be viable as a going concern; a strong selling point to the debt-instrument holders. And debt-instrument holders (except banks) will accept because it is unlikely that there will be a better deal.

After Hyflux restructures, how much dilution will existing shareholders face? 50%, or more?

Pak Anthony's money will only come in after Hyflux has resructured. Shares will be issued to SM, which means a second round of dilution to shareholders. By then, the original shareholders may be left with only 5-10% or so of their original stake.

Even though SM is paying many times Hyflux's last traded price, it does not seem likely that existing shareholders will benefit from it.

Hyflux will survive, but holders of its financial instruments may not.

If I’m not mistaken, if a haircut is proposed, holders of the perpetuals would have to vote for it. Let’s assume there are 5000 holders (how many are there? Anyone knows?). You’d have to propose something they can swallow and since many of them are mom and pop and even retirees, it would need to be significant otherwise, they can just vote no with their heart, and take their chances.

There are about 20,000 preference shareholders. The number of perpetual owners is unknown. It will be interesting to see if the mom and pop retirees will recover a significant amount of capital and if possible, news coverage can shed light of their financial mistakes

(20-10-2018, 08:51 PM)CY09 Wrote: There are about 20,000 preference shareholders. The number of perpetual owners is unknown. It will be interesting to see if the mom and pop retirees will recover a significant amount of capital and if possible, news coverage can shed light of their financial mistakes

The large number of retail holders could make it harder for Hyflux to convince them to take a significant haircut and is a significant logistics issue even just to wrangle them. Unlike more sophisticated investors they’d need significant explaining to and may not be entirely rational. If Hyflux is under a deadline, that makes it worse. There is incentive to make the haircut as reasonable as possible.

(20-10-2018, 09:06 PM)tanjm Wrote:

(20-10-2018, 08:51 PM)CY09 Wrote: There are about 20,000 preference shareholders. The number of perpetual owners is unknown. It will be interesting to see if the mom and pop retirees will recover a significant amount of capital and if possible, news coverage can shed light of their financial mistakes

The large number of retail holders could make it harder for Hyflux to convince them to take a significant haircut and is a significant logistics issue even just to wrangle them. Unlike more sophisticated investors they’d need significant explaining to and may not be entirely rational. If Hyflux is under a deadline, that makes it worse. There is incentive to make the haircut as reasonable as possible.

if the large number of retail holders dont want to back down, then salim will just walk away from the deal. I guess Salim wont be dumb (put it crudely) or kind (nicely) enough to come up with another 1b cash to pay the perpetual and preference shareholders

(21-10-2018, 08:58 AM)money Wrote:

(20-10-2018, 09:06 PM)tanjm Wrote:

(20-10-2018, 08:51 PM)CY09 Wrote: There are about 20,000 preference shareholders. The number of perpetual owners is unknown. It will be interesting to see if the mom and pop retirees will recover a significant amount of capital and if possible, news coverage can shed light of their financial mistakes

The large number of retail holders could make it harder for Hyflux to convince them to take a significant haircut and is a significant logistics issue even just to wrangle them. Unlike more sophisticated investors they’d need significant explaining to and may not be entirely rational. If Hyflux is under a deadline, that makes it worse. There is incentive to make the haircut as reasonable as possible.

if the large number of retail holders dont want to back down, then salim will just walk away from the deal. I guess Salim wont be dumb (put it crudely) or kind (nicely) enough to come up with another 1b cash to pay the perpetual and preference shareholders

I have always taught to support the SME rather than MNC and invest in local rather than MNC if we can help it. In this case, if truly the retail holders get "abandon", then is there a case to continue support local companies.


In addition, if the deal with Salim goes through, what will happen to our "local" Hyflux company. 

Hence, should retail investors at an early start or in the near future try to get out with whatever they can get rather than continue to invest in Hyflux.

Personally, I also favour the idea of supporting local SME to MNC, so that our own companies can strengthen our country's economy.

But in this particular case of Hyflux, it was just months back when the mgmt insisted on getting no less than book value for the loss-making TS even though financially, it is hard for any potential buyers to justify such a price.

I did not attend any restructuring retail investor meeting as I am not vested but I hope retail investors got a fair hearing from Hyflux mgmt at that time.

Moving forward, I hope they can do better for retail investors and get the best possible outcome.