1. Newly minted company Aqua Munda goes to Hyflux to buy out water/power production company's Accounts Payable -- namely some bonds, unsecured creditors and some contingent liabilities. Should'nt Aqua go to bondholders and creditors to buy out their Hyflux bonds and Accounts Receivables instead?
2. Aqua is actually making an offer through Hyflux. So there is no actual direct offer by Aqua to creditors and bondholders?
3. State media say Aqua is making a tender. It's asking sellers to quote their price. Aqua retains the right to accept or reject any offer, without the need to explain why.
4. Just imagine the administrative hassle. Supposing Aqua buys Hyflux's Accounts Receivable. It deals only with Hyflux to buy the debts on their books (an asset). But here, Aqua has to deal with the hundreds or thousands of retail bond holders and sundry creditors to buy what Hyflux owes them. It's unheard of.
5. How does this deal affect Hyflux? Absolutely nothing. They still owe the same amount of money, (about S$1.7B) but to a different party is all.
6. What's in this for Aqua? They take on Hyflux credit risk. So if they buy from bond holders and unsecured creditors at a good price and Hyflux manages to pull out of their crisis, it's boom time Charlie for Aqua. Since Hyflux is now suspended and its financial distress seems insurmountable, it can only mean Aqua knows something the market does not know.
7. The mystery deepens. Acra information shows Aqua's principal activities are water treatment, waste treatment and oilfield chemicals. It is then in the same line of business as Hyflux. Does it intend to go into business?. If so, why take over the liabilities and not ownership?. Is it a precursor to taking over the company? Resolve the messy retail bonds and unsecured creditors first and then to make an offer to shareholders? If that were so, surely the egg must come before the chicken. Aqua must have reached some agreement with major shareholders and secured creditors as pre-conditions. That begets questions of non-compliance of disclosure requirements by Hyflux.
8. If Aqua was recently registered as a company seeking to go into water treatment business, nothing is known of the personalities involved. Are they from the industry? Why are these people so coy? Surely they ought to step right out for public confidence.
9. Here's something that might give a clue. The shareholder of Aqua is Singapore citizen Mr. Bambang Sugeng Bin Kajairi. A Google search shows Bambang has been associated, at various times, as officer, director, CEO or shareholder with Geylang United FC, Reem Investments (UAE), CapitaLand Amanah Pte Ltd, some corporations in UK, Credenze group (sports, real estate, fund management) and senior management positions in the Ministry of Foreign Affairs.
10. So, Mr Bambang is no water industry guy. He is a PAP guy. Does he know something no one knows? Or could he be the PAP face in a government attempt to sort out the Hyflux debacle?
11. Could this be a government bailout disguised as an open market transaction? This makes sense. It's a political play to bail out local retail bond holders and small businesses. A Hyflux arrangement with bond holders will need to fix a single compensation rate which is almost impossible to satisfy all uncles and aunties. An Aqua tender allows individualised rates which should be palatable to all. Aqua has the right to accept or reject any offers. It is thus possible for a selective bailout of only the local retail investors and SME creditors at acceptable prices. Is this a smart way for the government to remain anonymous in bailing out small time local investors and ride out a high octane outpouring of anger unfairly directed at it, whilst at the same time, avoid setting a precedent for the market to seek the administration's support for investments gone bad?
12. Lastly, here is a trivial which may not mean anything. Mr Bambang is listed in the Panama Papers and has shareholdings in 2 offshore companies -- Bartley Development and Lindbergh International, both registered in Virgin Islands. Of the several associated personalities disclosed in Panama Papers is a Malaysian Mr Pang Shun Pen. He seems to be from the oilfield chemicals industry, one of Aqua's principal activities.
19 December 2019
Addendum:
States media mentioned Hyflux made some filing with SGX regarding Aqua's proposal. This is so strange. Aqua offers to purchase from the aunties and uncles their holdings of Hyflux bonds, and from SMEs their Hyflux debs. Hyflux is not privy to such transactions. It has nothing to do with them. So what SGX filing is required of Hyflux?
20 December 2019
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