Boustead Singapore

[Musicwhiz]

Business Times - 20 Aug 2010

TTI may shine again with Boustead's help

By VEN SREENIVASAN

COULD cash-rich Boustead Singapore be the saviour of once high-flying trading firm TTI International? In a move which surprised some market watchers, Boustead emerged as a 'white knight' to rescue troubled TTI's stalled flagship Big Box project.

TTI had pumped in some $95 million into this mega warehouse-cum-retail complex next to Jurong East MRT Station. However, client payment defaults amid the 2008/09 financial crisis left the company teetering with huge debts, inventory write-downs and impairment losses. After initial works to construct the basement on this 56,000 square metre plot, work on this ambitious project stalled. Now Boustead has come in, pledging to pump in some $150 million to build an eight-storey 125,000 sq m gross floor area warehouse-cum-retail complex.

Led by the husband-and-wife team of executive chairman Sng Sze Hiang and executive director Julia Tong, TTI built up an impressive portfolio as a global trader of mainly electronic products. In particular, it had built up its Akira brand into a household name. In 2008, prior to the financial meltdown, the company posted $5.6 million profit on revenue of $876 million. Its NTA was $185 million.

But to finance its rapid expansion overseas, the company took on significant syndicated bank loans from the likes of BNP Paribas, Rabobank, DBS Bank, KBC Bank and OCBC in 2006. To further fund the rapid expansion, it also launched a $250 million multi-currency medium term note (MTN) programme through DBS Bank in early 2008. Mr Sng and Ms Tong gave personal guarantees to the company's lenders.

By October 2008, the financial crisis hit and the company was faced with non-payment by clients. It defaulted on some of the MTN. Banks started pulling back TTI's credit facilities, including some $83 million which was cancelled or frozen in 2009. By end-2009, the company was facing some $600 million in claims. Financial adviser nTan Corporate Advisory and legal firm WongPartnership, who were appointed to assess the damage, proposed a scheme of arrangement to manage the debts and impose a moratorium on any immediate action against TTI. Meanwhile, Mr Sng and Ms Tong sought court protection against personal bankruptcy.

In March this year, the High Court approved a scheme of arrangement allowing the company to conduct a Reverse Dutch Auction on nearly $90 million of the debt, whereby creditors would take an 85 per cent haircut. Another $450 million are to be converted to zero-coupon convertible bonds, subject to staggered conversion. Most creditors have approved the scheme, with the exception of OCBC and building firm Ho Lee Construction.

This restructuring is aimed at lifting TTI's balance sheet to a positive NTA position of some $7.6 million by year-end, from a negative equity position of $67.4 million. What is more critical is how Boustead's entry has now set the stage for TTI to claw back into the black and continue on the road to a sustainable recovery. The mainboard-listed engineering giant has an uncanny knack for picking winners. Perhaps it sees something in TTI which investors have yet to pick up on. The importance of Big Box for TTI cannot be overstated. Serving a captive market of some 2 million residents in the Jurong East Gateway region, Big Box will be the biggest installation of its kind on this part of the island.

With potential tenants for hypermarts, warehouses, various retail outlets and offices already coming forward, yields could be in the region of 10-15 per cent, by some estimates. Total cost of development is estimated to be some $247 million. But on completion in 18 months, it is expected to be worth double that.

TTI will retain a 40 per cent stake in the project, and will also be the master lessee of this huge asset. The project will trigger positive cashflow for TTI, enabling it to achieve profitability again, and help it pay down its huge debt.

Not bad for a company whose ability to remain a going concern was in doubt just a year ago. But while most creditors supported TTI's scheme of arrangement, investors need to take note that it still has a long road to full recovery and a critical factor would be the outcome of the appeal lodged in the courts by OCBC and Ho Lee Construction against the High Court-sanctioned scheme.

[Musicwhiz]

Boustead's Big Box Project's fate relies on the outcome of the vote this Friday......

Business Times - 20 Sep 2010

Hock Lock Siew
Fate of TTI hangs on re-vote

By VEN SREENIVASAN

THE fate of mainboard-listed TT International Ltd (TTI), a company with presence in more than 60 countries and owner of Akira, one of Singapore's most well-known brands, will be decided this Friday by creditors who have been ordered by the country's highest court to vote a second time on a major restructuring.

TTI had secured support from creditors owed 75.06 per cent of the original $503 million debts for a Scheme of Arrangement which was approved by High Court judge Judith Prakash on March 15 this year.

But two dissenting creditors - OCBC Bank and Ho Lee Construction - appealed, alleging that specific claims by supporting creditors were accepted or overstated while opposing creditors' claims were rejected by the scheme manager, Nicky Tan of nTan Corporate Advisory, and could have swung the vote the other way.

At the Court of Appeal, OCBC (represented by Senior Counsel Lee Eng Beng of Rajah & Tann), and Ho Lee (represented by Senior Counsel Thio Shen Yi of TSMP Law Corporation), argued for more 'transparency and procedural fairness' given the 'razor thin margin' by which creditors voted for the scheme.

But TTI's Senior Counsel Alvin Yeo of Wong Partnership disagreed, noting that the report by PricewaterhouseCoopers, engaged by TTI at the request of OCBC, had verified the scheme to be 'fair and reasonable'.

D-Day

On Aug 18, the Court of Appeal - comprising Chief Justice Chan Sek Keong, Justice Andrew Phang and Justice VK Rajah - convened to consider an appeal by the two dissenting creditors and ordered the re-vote, subject to 'new directions'. The re-vote will be done this Friday, Sept 24.

But the outcome could be stacked against TTI, which needs a minimum 75 per cent support, under Section 210 of the Companies Act.

This is because the process could exclude some $106 million of inter-company and subordinated debt, including $87 million owed to its wholly-owned subsidiary Akira Corporation, or about 17 per cent of total debts in the first vote.

The appeal court's directions on 'specifically disputed debts' also effectively prevent three creditors - St George's Bank, Ascendas REIT and First Capital Insurance Ltd - who are owed $88.5 million and who originally supported the scheme, from casting their full support in the re-vote.

In addition, the appeals court has allowed Ho Lee to claim for loss of profit due to the termination of the Big Box, TTI's planned eight-storey 1.3 million sq ft warehouse-cum-retail mall sited next to Jurong East MRT. Based on its last three major projects, the contractor is claiming a profit margin of 14.85 per cent on a total project value of $226 million, which translates into a profit of $33 million.

Depending on the court's calculation of Ho Lee's estimate, the total debt eligible for re-vote now ranges between $320 million and $360 million.

If TTI does not secure at least 75 per cent of the votes this Friday, it could mark a sad end to a company which had turned around despite its debt woes.

Led by husband-and-wife majority shareholders Sng Sze Hiang and Julia Tong, this global distributor of electronic products posted revenue of $875 million in FY2008 before the global financial crisis struck. It cut its global workforce from over 3,000 before the crisis to 1,700 now. And from losing $200 million, it posted a net profit of $200,000 last year (FY2010).

But last week, this was adjusted by auditors to a loss of $5.3 million due to 'dire consequences of the prolonged standstill conditions which the Company and its subsidiaries operate in, resulting in additional impairment and write-offs'.

The loss included over $10 million in restructuring fees TTI paid in FY2010. The company spends $1 million a month on professional fees, which could otherwise be used to revive the business and return value to shareholders and staff.

Glimmer of hope

TTI's road to recovery could be derailed by the legal objections of two creditors to whom it has admitted to $44 million of debts, or about 8.8 per cent of the original eligible vote. But because of the technicalities outlined by the appeals court, the $44 million combined with the estimated $33 million in foregone profit claimed by Ho Lee now accounts for over 20 per cent of the eligible votes.

Voters rejecting the scheme would also be rebuffing a 'white-knight' offer from mainboard-listed Boustead Singapore to invest $150 million to revive Big Box, a project which would have been a significant new source of income for TTI, which had already pumped some $95 million into it prior to its current predicament.

To many observers, it may seem hard to fathom how creditors would be best served by liquidating this trading company with few assets and 1,700 employees, instead of allowing it to restructure and revive.

But all may not be lost yet.

The appeals court has directed auditors KPMG to check whether inter-company liabilities as disclosed by TTI are reasonable. If the outcome is positive, TTI could still surpass the 75 per cent mark by the thinnest of margins.

Meanwhile, employees and 3,800 shareholders will wait with bated breath as representatives of up to 97 creditors make their way to the office of Wong Partnership, TTI's lawyers, on the 20th floor of One George St to re-vote this Friday. The results will be reported to the appeals court four days later.

[Musicwhiz]

Incidentally, Boustead and FF Wong is featured on the cover of this week's The Edge Singapore magazine. There are 3 full pages (Page 26 to 28) on the company as well as a diagram of its revenue mix and Group Structure.

The following are points I summarized from reading the article:-

1) Boustead's shares are trading at 11x historical FY 2010 earnings (writer was using 94 cents/share which was closing price on Thursday); and FF Wong rues that analysts and investors cannot really grasp Boustead's myriad of diverse businesses. This is because a significant portion of revenues are project-oriented; and this makes profits and cash flows "lumpy" and uncertain.

2) FF Wong does NOT rule out putting some of Boustead's business units up for sale, in order to raise cash for better opportunities to grow. Some of Boustead's units operate in countries such as UK where it is remote; and FF Wong wants to focus on making Boustead a regional multi-national company, rather than a global player.

3) Indonesia (where FF Wong has extensive contacts) and Vietnam (which is lacking in infrastructure to keep up with the country's breakneck growth) are seen as two countries with good potential for Boustead's expansion into the S.E.A region.

4) One unit which FF Wong considers divesting may be BIH (Boustead International Heaters). He had been approached by investors who were interested to buy BIH as it had a niche market, but he declined (I assume it was because the price offered was not attractive!). Still, he says it's no issue as BIH is profitable and he could just push through into China and the region. Another option is to list BIH separately to raise funds, as BIH has enough of a track record to be listed.

5) Other business units which have good enough track records to be listed are Boustead Projects (91.7% owned by Boustead) and ESRI (which deals with Geo-Spatial Technology). The idea is to be able to allow investors to value these businesses if they were listed and also allow the businesses to raise capital more easily to fund future expansion. Boustead's value as a Group would then be enhanced and clearer as a result.

6) For the Bio-Treat investment, Boustead's due diligence turned up a number of issues which have yet to be resolved. There is a chance of them dropping this project if the issues cannot be resolved.

7) For the TTI Big Box Project, FF Wong says that the creditors should vote FOR the resolution to restructure and invite Boustead in as a white knight, as it would be "win-win" for all parties. He said if the creditors were "stupid" enough to oppose the resolution, then the project would go to the Govt and none of the creditors would get their money back....

8) One interesting area where Boustead has no exposure to is natural resources. FF Wong is meeting up with a potential business partner from Indonesia who has expressed interest in this area, so Boustead could possibly be expanding into this segment.

Cheers!

[Musicwhiz]

Business Times - 04 Oct 2010

TTI verdict to have broad implications

By VEN SREENIVASAN

THREE of Singapore's most respected judges will convene in a landmark hearing tomorrow which - apart from determining the fates of 1,700 staff and investments of 3,800 shareholders of Singapore Exchange-listed TT International - will have broad implications for future debt restructuring.

After nearly two years of negotiations, court appearances and a mountain of submissions by advisers, auditors and lawyers - estimated to have cost TTI $23 million in professional fees so far - the Court of Appeal will decide whether to approve a complex Scheme of Arrangement to repay 97 creditors at least 70 cents for each dollar of debt.

To recap, dissenting creditors OCBC Bank and Ho Lee Construction Ltd had appealed successfully last month to the court - comprising Chief Justice Chan Sek Keong, Justice Andrew Phang and Justice VK Rajah - to set aside a March 15 High Court sanction approving the original scheme, citing 'lack of disclosure, fairness and transparency.'

The judges ordered a re-vote on Sept 24, the results of which were disclosed four days later and presented by scheme manager Nicky Tan of nTan Corporate Advisory as four 'possible outcomes'.

Three of the outcomes show that TTI had secured the minimum 75 per cent of support required under Section 210 of the Companies Act.

Loss of profit

Sanction of the scheme hinges on how the court calculates the loss of profit claimed by Ho Lee which had been directed to provide the average of its profits (in percentage) of three of its largest contracts over the last two years and apply that to its contract with TTI to build Big Box, a warehouse-cum-retail mall valued at $226 million. The uncompleted project is now an unsightly hole in the ground next to the Jurong East MRT station.

nTan says that Ho Lee failed to comply with the court's directions by claiming an expected profit margin of 14.58 per cent, amounting to $33 million. Instead, nTan - which had already admitted to a claim of $22 million from Ho Lee - has suggested either a profit margin of 1.7 per cent or 4.1 per cent in deriving two of the possible outcomes favouring TTI.

Another issue expected is whether the court will admit part of the debt excluded earlier by the court from the re-vote.

On Aug 18, the court excluded from the re-vote some $106 million of inter-company and subordinated debt, including $87 million owed to TTI's wholly owned Akira Corporation, or about 17 per cent of the total debts of $503 million in the first vote.

The court called for a report by accounting giant KPMG on Akira's debts.

Small discrepancy

KPMG's findings submitted on Sept 9 showed a discrepancy of only $67,303 or 0.078 per cent of Akira's debts compared to an earlier finding by nTan and PwC (representing bank creditors). TTI's lawyers are expected to ask the court to allow this block of debts to be counted in the re-vote.

The court also has to decide on 'specifically disputed debts' which had prevented St George's Bank, Ascendas Reit and First Capital Insurance Ltd from fully participating in the re-vote. The three are owed $88.5 million, and it remains to be seen how much, if at all, of these debts can be included in the final outcome.

TTI had scraped through the first vote in October 2009 with 75.06 per cent of the original $503 million of debts. But 11 months later, despite restrictions which left out about $180 million of debts, more of the creditors allowed to re-vote seem to have swung over to TTI instead of either opposing or abstaining as they did previously.

OCBC and Ho Lee are expected to object to nTan's declaration that the scheme has been approved, subject to the court's direction.

But OCBC has stated that it has no intention to wind up TTI, which distributes electronics and other products in 60 countries. It has suggested that it is open to an alternative restructuring scheme under a new manager. However, in an open letter to creditors on Sept 15, Ho Lee had asked for TTI to be placed under judicial management or liquidation.

Death sentence

TTI has made it clear that judicial management is akin to a 'death sentence' as customers and suppliers would desert it. In a sign of the toll on the restructuring, TTI's auditors adjusted results for the financial year ended March 31, 2010 from a profit of $200,000 to a loss of $5.3 million, citing 'dire consequences of the prolonged standstill conditions . . . resulting in additional impairment and write-offs'.

While a new scheme is an option, it remains unclear if TTI's major shareholders, staff and management have the stamina or financial resources to start all over with a new set of professionals, and endure another protracted period of restructuring and pay millions more in costs.

Among those awaiting tomorrow's outcome is mainboard-listed Boustead Singapore, which has committed $150 million to revive Big Box, in which TTI has already invested $95 million.

Boustead has set Oct 15 - 10 days after the court hearing - as the final date to conclude its 'white-knight' offer which, if accepted, could immediately brighten the prospects of this homegrown company.

[yeokiwi]

I can understand Ho Lee insistence to get back the money by any means.
But what is OCBC doing?

They said they do not want to wind up TTI but they wants an alternative scheme.
An alternative scheme will mean that TTI will definitely go under since Boustead's offer will lapse.
So basically, OCBC wants liquidation but do not want to say so?

With Jurong East MRT nearby, a large workforce at the business parks and high residential population, Big Box has a good chance of doing well.

[d.o.g.]

I can understand Ho Lee insistence to get back the money by any means.
But what is OCBC doing?

OCBC probably calculated that a division of the spoils in liquidation would yield more value than the scheme of arrangement which proposes an 85% haircut on the debt plus zero-coupon CBs.

After all, as the articles state, Big Box has some promise. So if liquidation is forced, OCBC will end up with a stake in Big Box that they can resell (to Boustead?) to make good the loan or even make a profit.

[Musicwhiz]

Boustead secures S$9m contracts from oil & gas industries in South America
By Jonathan Peeris | Posted: 04 October 2010 1840 hrs

SINGAPORE : Mainboard-listed Boustead on Monday said that its Energy-Related Engineering Division has secured S$9 million in contracts from the oil & gas industries in South America.

The contracts involve the design, process engineering and construction of waste heat recovery units for onshore and offshore oil & gas installations in Brazil and Chile.

These units are systems installed to recover the waste heat from gas turbines used to power upstream and downstream oil & gas processes.

The waste heat is then recycled to meet process heating requirements.

In recent times, oil & gas corporations globally have increased investments in waste heat recovery units in order to capture the dual benefits of significantly enhancing the energy efficiency of new and existing processes, and implementing green technology.

The contracts are not expected to have a material impact on the earnings of the company in the current financial year. - CNA/ms

[ncy]

TTI gets a breather
Creditor Ho Lee open to one month moratorium not to wind up company


SINGAPORE - The fate of TT International (TTI), the firm behind the Akira brand, still hangs in the balance as judgment on its debt restructuring case has been set for next week by the Court of Appeal.

The judgment will put clarity on whether the homegrown firm can proceed with its scheme of arrangement to manage its debts or be thrown into liquidation.

But the tide seems to be turning for the company as Ho Lee, one of its creditors, said it was open to allowing a one-month moratorium during which it would not act to wind up the company.

Ho Lee also said it was willing to work with other creditors, like OCBC and Rabobank, to come up with a "more broad and palatable" scheme that will benefit all creditors.

The construction firm also proposed to inject some cash to buy the Big Box project, which can help pay other creditors.

Mainboard-listed Boustead Singapore had earlier made a $150 million offer to revive Big Box, in which TTI had already invested $95 million. That deal is set to conclude on Oct 15.

Ho Lee said it had no faith in the current scheme, which it considered "inherently un-doable and set up for failure." It said the court should not sanction it.

The scheme of arrangement approved by the High Court in March is to manage TTI's debts and put a moratorium on any actions against it by creditors. In all, TTI owes $497 million.

OCBC and Ho Lee have since objected to the scheme and filed legal action, leading the court to order and set guidelines for a re-vote held last month.

Meanwhile, the scheme manager said the loss of profit claimed by Ho Lee did not comply with the court's ruling and the creditor asked the Court of Appeal for consideration to re-calculate.

Yesterday, both OCBC and Ho Lee also proposed to replace the scheme manager, nTan Advisory Corporate Services, citing its lack of transparency and independence in conducting the scheme's voting process.

But the Court of Appeal told OCBC and Ho Lee lawyers that a change in the scheme manager might diminish its success rate and may not be in the interest of creditors as this would incur more costs.

TTI's lawyers said their position was to proceed with the scheme if the court sanctions it.

[ncy]

Singapore, 7 October 2010

Boustead Singapore Limited ("Boustead") is pleased to announce that its wholly-owned subsidiary, Boustead Salcon Water Solutions Pte Ltd ("Salcon") , a leading global specialist in water and wastewater engineering , has been awarded a multi-million dollar contract to design, engineer and construct a water treatment and return condensate
plant (the "Plant") for TP Utilities Pte Ltd ("TPU"), a subsidiary of Tuas Power Ltd, the third largest power generation corporation in Singapore.

The Plant was awarded to Salcon by Marubeni Corporation ("Marubeni"), one of Japanss largest conglomerates and EPC (Engineering, Procurement and Construction) corporations, which secured the EPC contract from TPU to construct the US$250 million Tuas Power Tembusu Multi-Utilities Complex (the "Complex"), the first and largest of its kind in Singapore to employ a fuel mix of coal and tropical biomass for the generation of
utilities.

The Complex is due to be completed in 2012 and is located at the rapidly
expanding Tembusu industrial sector on Jurong Island. The Plant will comprise a 1,800 cubic metres/day reverse osmosis raw water treatment
facility and 6,000 cubic metres/day return condensate treatment facility to recover condensate from the utility boiler section, reducing the amount of makeup water required and providing significant savings on fuel.

[Musicwhiz]

Business Times - 08 Oct 2010

Boustead unit wins TPU deal

By JOYCE HOOI

BOUSTEAD Singapore's wholly owned subsidiary, Boustead Salcon Water Solutions Pte Ltd, has won a multi-million dollar contract to design, engineer and construct a water treatment and return condensate plant for Tuas Power subsidiary TP Utilities Pte Ltd (TPU).

The contract was awarded by Japanese conglomerate Marubeni Corporation, which clinched a US$250 million deal to build the Tuas Power Tembusu Multi-Utilities Complex.

The complex, in the Tembusu industrial sector on Jurong Island, is slated to be completed in 2012.

The plant will include a 1,800 cubic metres/day reverse osmosis raw water treatment facility and a 6,000 cubic metres/day facility to recover condensate from the utility boiler section. This will reduce the amount of make-up water required and achieve significant fuel savings.

'We are honoured to be selected by Marubeni and Tuas Power to participate in the largest utilities development on Jurong Island,' said Tan Kwee Kok, chief executive officer of Boustead Salcon Water Solutions.

'We will continue to deploy our strong track record and vast expertise in water and waste-water engineering in the power industry to ensure the delivery of high-quality treated water that will help Tuas Power achieve greater energy and water efficiency, and make the Tuas Power Tembusu Multi-Utilities Complex a success.'

With the contract from TPU, Boustead Salcon Water Solutions can now claim the distinction of having been contractor to design, engineer and construct water and waste-water treatment plants for all three major local power generation corporations. The other two are PowerSeraya and Senoko Energy.

The deal is not expected to have a material impact on the profitability, earnings per share and net asset value per share of Boustead for the current financial year ending March 31, 2011.