Official Opening of Tuaspring Desalination Plant by PM Lee (Olivia Lum at the right)

Analysts: Misconception to bet on Government to help Hyflux

Bloomberg reported yesterday (27 Feb) that Hyflux creditors are due to file proof by Friday (1 Mar) of the obligations that Hyflux owes them. In total, the company now has S$2.7 billion unsecured debt owed to creditors.

Hyflux has earlier unveiled a proposal to impose 75 to 90 percent haircuts on unsecured creditors. It brought in a white knight last October – Indonesian tycoons would snap up Hyflux with only S$400 million cash for 60 percent equity.

Part of the unsecured debt came from about 34,000 mom-and-pop investors who bought some of the Hyflux debt instruments through ATMs.

Understandably, many “moms and pops” are angry. Online petitions are going around asking people to vote against Hyflux’s latest proposal. Investors are calling for better terms and state intervention.

Some of the Hyflux investors think that the government would help, given that the company owns the Tuaspring desalination plant deemed crucial to Singapore’s water supply. Others are thinking the government would do so at a time when general elections are around the corner.

But these bets may be misplaced, some observers argue. “From some of our conversations, many have invested in Hyflux based on the premise of government backing,” said Ang Chung Yuh, a fixed-income analyst at iFast Corp in Singapore. “It’s a misconception.”

The government has signaled in Parliament that Hyflux case is a “commercial matter”. Last Nov, Minister Masagos said in Parliament that PUB has been closely monitoring developments relating to Hyflux’s debt situation and its business reorganisation.

“Hyflux has entered into a restructuring agreement with an Indonesian consortium, SM Investments Private Limited,” he said.

“This is a commercial matter and restructuring discussions are ongoing. It will therefore not be appropriate for my Ministry to comment on the details. Nonetheless, Members can be assured that we will not allow our water security to be affected.”

At its peak, Hyflux’s market capitalization was worth S$2 billion in 2010. It shrank to S$165 million when shares halted in May last year.

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