SGX RegCo forms working group to review retail bonds framework amid Hyflux debacle

SINGAPORE (Jan 2): Singapore Exchange Regulation (SGX RegCo) has set up a working group to review the retail bonds regulatory framework.

Comprising industry professionals and investors, the group will discuss matters such as the admission criteria for retail bond listings, the continuing obligations of issuers of such bonds, and ways to protect bondholder interest in the event of a default or restructuring.

The working group is expected to present its recommendations and views to SGX RegCo by mid-2020. This will be followed by a public consultation, likely take place by the end of the year.

“We are reviewing the retail bonds framework following recent developments and feedback from the market. 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,” says Michael Tang, SGX RegCo’s head of listing policy and product admission.

The market regulator’s announcement comes just days after the Securities Investors Association of Singapore (SIAS) on Monday urged an investor attempting to buy over the debt of embattled water treatment firm Hyflux to be more transparent in its offer bid.

See: SIAS calls on Aqua Munda to show 'more transparency' in bid for Hyflux debt

SIAS is one of the eight organisations roped in by SGX RegCo to review the retail bonds regulatory framework. The working group will also include representatives from financial services firm Perpetual (Asia) Limited; law firms Allen & Gledhill, Allen & Overy, and Clifford Chance; as well as the three local banks DBS, OCBC and UOB.

Hyflux found itself on the brink of bankruptcy after it went on a debt-fuelled expansion drive just as oil prices started to collapse and Middle Eastern states began to cancel their infrastructure projects.

In 2013, it also opened the Tuaspring desalination and power plant, which was built with more than $1.4 billion in bank loans as well as the sale of perpetual securities to 34,000 retail investors who now stand to lose almost all their money if the company goes bust.

Hyflux in late-November 2019 finally signed a $400-million restructuring agreement with Middle Eastern utility player Utico FZC.

Under the latest deal, Utico and co-investors will acquire new Hyflux shares representing a 95% stake of the enlarged capital of the company for a total of $300 million. Hyflux will also get a working capital loan of up to $100 million.

See: Hyflux finally signs $400 mil rescue deal with Utico

“The working group will also provide views on how individual investors can be better served when bonds they hold are in distress. We want to hear suggestions on how to fund trustees acting for bondholders and ways to help bondholders organise themselves,” says SGX RegCo’s Tang.