SINGAPORE (Mar 9): Hyflux is proposing to amend the terms of its restructuring plan to allow the junior creditor group -- which includes some 34,000 minority investors in its preference shares and perpetual securities (P&Ps) -- to share the upside from contingent liabilities extinguishing or expiring.

See: Clash over $2.7 bil of debt at Hyflux heats up

See also: Hyflux's perpetual security holders get back only 10% of investment in restructure

The alternative proposal announced on Friday follows a Feb 27 letter written by investor advocacy group Securities Investors Association Singapore (SIAS), urging Hyflux to give its junior creditor group a fairer deal as the existing restructuring plan “clearly favours” the senior unsecured creditors that include banks and noteholders.

In particular, SIAS disagreed with how, in the event that liabilities -- such as liquidated damages in a construction project -- did not crystallise, the 24.6% recovery rate for the senior unsecured creditors could increase although junior creditors would see their recovery rates stay unchanged at 10.7%.

Under the current proposal, 80% of the contingent claim’s restructuring entitlement, kept in escrow, will be distributed to senior creditors if liquidated damages did not crystallise.

Hyflux’s proposed amendments will see a reduction in the management payouts of the first contingent claim and the second contingent claim to 10% from 20%.

This means that when contingent claims under the scheme extinguish over the next two years, 90% -- instead of 80% -- of the cash allocated to those extinguished contingent claims will be distributed among both the holders of its P&Ps and the unsecured scheme parties, rather than just being distributed among the latter.

The amount to be distributed to each debt securities scheme parties and the unsecured scheme parties will be in proportion to their respective accepted scheme claims.

In addition, when all remaining contingent claims expire at the end of a two-year period, the money to be paid out under final contingent claim will be distributed among both the junior and unsecured creditors, rather than just being distributed among the latter, the company said.

Hyflux also confirmed that no member of the present Hyflux board or senior management will receive any part of the first and second contingent claim management payouts. All of amounts will only be distributed to the project staff responsible for the extinguishment of the contingent claims.

The $230 million claim by Mitsubishi Heavy Industries and related companies will not be part of the scheme. Neither will the company be regarded as a scheme party.

Hyflux's scheme meeting, where creditors will vote on its restructuring plan, will take place on Apr 5.