The present directors of water treatment firm Hyflux should “step aside and allow new directors” to “deal with new offers” from prospective white knights in its restructuring process, said Securities Investors Association Singapore (SIAS).
SIAS founder, president and CEO David Gerald in a statement on Wednesday (3 June) highlighted that the association has been calling upon the Hyflux Board of Directors to step down since January this year due to its failure to successfully restructure the firm.
Mr Gerald said, however, that if the current Hyflux board chooses to remain, “it must work harder and be willing to communicate better with its stakeholders in a timely manner”.
He added that SIAS “is disappointed that the Board has on numerous occasion fail to respond to questions raised on behalf of our retail investors in Hyflux”.
“Hyflux Board has to decide whether it can or cannot find the white knight to salvage the company. Two years have passed and to-date it has not succeeded in successfully restructuring the company,” Mr Gerald stressed, referencing the failed agreements with Middle Eastern utility firm Utico and SM Investments (SMI), the Singapore unit of Hyflux’s debt consortium Salim-Medco.
Mr Gerald’s statement followed media reports of a joint criminal probe by the Commercial Affairs Department (CAD) of the Singapore Police Force, the Monetary Authority of Singapore (MAS), and the Accounting and Corporate Regulatory Authority (ACRA) into Hyflux and its current and former directors for suspected false and misleading statements, breach of disclosure requirements, as well as non-compliance with accounting standards.
Authorities said, however, that they do not intend to interfere Hyflux’s current reorganisation plans with the criminal investigation.
“The investigations are not intended to interfere with Hyflux’s current reorganisation plans as they focus on determining the role of the subjects in the alleged disclosure lapses and non-compliance with accounting standards between 2011 and 2018,” according to authorities.
Responding to this issue, Hyflux in a bourse filing on Tuesday stated that the authorities have sent a notice to the company, requesting it to provide certain information and documents relating to the Tuaspring desalination plant.
Hyflux noted that it will make further announcements as and when there are any updates, adding that the company is “presently assisting and will cooperate fully with CAD in its investigations”.
It is believed that those who served as board of directors during the period between 2011 and 2018 — including founder Olivia Lum — will be under investigation.
Touching on bondholding investors as well as perpetual securities and preference (P&P) holders who have approached SIAS for assistance in taking legal action against the Hyflux Board, Mr Gerald said that the association has “advised the investors interested in legal action to seek their own legal counsel or wait for the right time that would warrant such an action”.
This is because “such an initiative now would affect any restructuring plan”, he explained.
“SIAS still hopes that the Hyflux Board will do the right thing expeditiously in the interest of all investors who have put their faith in them and were ready to part with their money on the basis on what was put out in their documents,” said Mr Gerald, adding that the current criminal investigation is “a troubling situation for all stakeholders of Hyflux”.
Bloomberg reported on 12 March last year that around 34,000 retail investors in the beleaguered company are at risk of losing up to 90 per cent of their capital in the company’s new restructuring plan.
In addition to the potential losses of junior securities holders, senior securities holders and banks will most likely lose around 75 per cent of their capital invested in Hyflux.
The same month, Hyflux had reportedly mentioned adjusting its restructuring strategy in a bid to assist its retail investors, including scaling-down incentive plans for staff for completing projects and future payout sharing by creditors.