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Why Hyflux Perpetual and Preference Holders should Vote “No” to the Restructuring.

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Hyflux has released its offer to bondholder, perpetual holders towards restructuring of the company after the Tuaspring’s offer. 

Details of Offer for Perps and Pref Shareholders

To summarise, Hyflux has offered to exchange the $900 million in value for Perpetuals and Preference shareholders into 10.26% of the restructured company + a $27 million cash repayment.

Based on Salim action of injecting $400 million to obtain 60% of the restructured company, it can be seen that 10.26% of the company, worth roughly $67 million, was given to perpetual and preference shareholders. This means Preference and perpetuals holders will get about $94 million back for their $900 million

While the CEO and board of directors has made a goodwill gesture by giving their shares to retail holders, I think the current deal is not good to the current group of perpetual and preference holders and should be voted against. 

Voting “No” to the restructuring may result in getting more capital back

In Hyflux’s reply to the Townhall questions, it was singled out that the company received an indicative bid which valued Tuaspring at $1.4 Billion (inclusive of Maybank’s $518 million debt attached to Tuaspring) from parties of UAE or China, this is shown in the screenshot below, source

Hyflux Answer to the Townhall Question on Tuaspring Value


As mentioned, only two companies were pre-approved by PUB to bid and this resulted in Sembcorp submitting a bid less than $518 million (inclusive of Maybank’s $500+ mil debt). Judging by the description of events, if more bidders had been pre-approved by PUB, Tuaspring could potentially fetch up to $900 million should Tuaspring be put into the market again.

Secondly, it is worth noting that in recent times, USEP in Singapore had been inching upwards and this means in future, Tuaspring will be worth more in value. The majority of Tuaspring’s revenue is derived from selling electricity (via USEP); and since 2015, USEP prices in Singapore has increased from $60+ to that in the region of $110. The near doubling in electricity price in Singapore means a potential re rating of Tuaspring value and  possible realisation of a larger proportion of the stated $1 billion plus book value valuation.

To perpetual and preferences shareholders, an increase of $400-500 million in realisable value is a significant amount of money and points to a potential increase in capital recovered. Even if there are only given 25% of the extra money, it will mean a doubling in amount of capital they can recover.

During the townhall, Perpetual and Preference shareholders were offered the worst case scenario where in the event of liquidation they would receive nothing at all. However, this might not be true given that we are now aware that the value of Tuaspring is more than what Sembcorp has offered. Due to the restrictions imposed by PUB and the need for them to approve the buyers,  this has resulted in a massive loss to perpetual and preference shareholders 

It is strongly advised that the first offer be rejected. In my own opinion, a minimal 20% recovery rate is a possibility, considering all known facts

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