Dear Sir,
Hyflux has been in the news lately, and for all the wrong reasons. Information emanating from the company has been confusing, insufficient and at times not posted expeditiously.
In an attempt to correct this, two town hall meetings were facilitated by the Securities Investors Association (Singapore), or SIAS, for its members.
However, at these town hall meetings, many relevant questions regarding Hyflux’s past operations and financial performance were not answered satisfactorily. Some questions were not even answered due to the strict cut-off time. Attendees were only allowed to enter questions electronically and could not verbally reciprocate the replies. It was all so mechanical. There were no robust discussions. Many left more perplexed than before they went in.
However, it is heartening to read that SIAS has now followed up with a letter and a list of questions to the board of directors. Hyflux has said that it will respond and we shall await its reply.
Many retail investors have commented that the proposed restructuring that is now being considered seems like a sellout to external investors on the cheap. They say that Hyflux should have attempted an internal restructuring first, without sacrificing the perpetual securities (perps), preference shares (prefs) and note holders, for example, by varying the terms of these instruments, and renegotiating with other creditors.
Many investors have poured their hard-earned monies and life savings into the perps, prefs and notes after being enamoured with Hyflux’s earlier performances and public pronouncements. It is incredible that Hyflux’s fortunes could take a turn for the worse so suddenly and despite all the rosy pictures painted in the past. Up to the very last minute, for example, Hyflux was valuing its Tuaspring plant at book value, when clearly its market value was way below that.
If Hyflux is in such dire straits, it may be better for the company to be liquidated rather than bailed out on unfavourable terms to perps, prefs and note holders. In either case, it makes no difference to them, as they will get almost nothing.
In the light of so many unanswered questions and also the ones posted by SIAS recently, the relevant authorities should perhaps initiate an investigation into Hyflux’s past operations and financial performance to uncover any wrongdoings, if any. Hyflux has a lot to answer to its stakeholders.
In addition, the restructuring process should not be allowed to proceed till the investigations are complete and no wrongdoings are uncovered. Prefs, perps and notes are not standard equity instruments, and many retail investors do not fully understand them and the risks involved. In hindsight, they should have been classified as specialised investment products, or SIPs. Better still, these should have been packaged and be sold only to accredited investors who can better understand and shoulder the risks associated with these instruments.
Vincent Khoo
(The writer is a remisier with over 20 years’ experience with a local bank-backed broking firm)
