As a result of the high profile bankruptcy of the water treatment firm Hyflux, the Singapore Exchange Regulation (SGX RegCo) is considering to enforce more stringent regulations for listed retail bonds, which will entail tighter admission criteria for companies.
Earlier on 2 Jan 2020 (Thursday), SGX Regco stated that in order to review the current retail bonds regulatory framework, it has formed a working group consisting of representatives from an investor group, law firms and banks.
The head of listing policy and product admission at SGX Regco, Michael Tang mentioned that “The possibility of tightening the admission criteria including requiring a minimum level of subscription by institutional investors and a credit rating are among matters to be discussed.”
By the middle of this year, the SGX Regco is expected to receive some recommendations from the working group. After these recommendations are provided, a public consultation is due to be held by the end of the year.
In May 2018, a court-supervised financial restructuring was filed by the debt-burdened water treatment company, Hyflux who fell into bankruptcy due to its inability to repay its debt obligations. The court commenced the six-month reorganisation of liabilities which would allow the company to devote their efforts towards maintaining discussions with important investors while also allowing it to complete projects, target areas for growth and optimise operations. These improvements would ultimately improve the company’s cash flow, which would hopefully put them in a better financial position.
The holdings of almost 50,000 retail investors have suffered due to Hyflux’s financial collapse, among which are bondholders and shareholders. Billions have been invested into the company, which was once a model Singapore company that is the national pride of the country.
In November last year, Hyflux struck a restructuring deal with United Arab Emirates-based utility company, Utico FZC in an effort to ease Hyflux’s financial difficulties. The S$400 million deal required the approval of Utico’s junior and senior creditors.
The UAE company purchased 88 per cent of Hyflux’s shares in return for a S$100 million shareholder loan to Hyflux and a S$300 million worth of investment in equity. In addition to this, Utico also offered extra cash to Hyflux’s preference (PNP) shareholders and retail perpetual securities as well as a 4 per cent stake in cash in the expanded Utico group. Utico provided assistance in the form of urgent interim funding and working capital while also negotiating on behalf of Hyflux with the retail investors as well as the Public Utilities Board.