Hyflux 6% perpetual callable 2020

This retail bond is currently at 0.89 (ask) on SGX. It is callable on 2020 or it resets at 4Y SOR + 4.2% (with a step up of 2%). The reset rate makes it likely to be called.

At this price, it is a yield to call of 11.4%. All this is pretty tasty.

I realise that Hyflux has issues, but this kind of yield is hard to ignore and possibly worth devoting a small part of the portfolio to it.

Does any one who follows Hyflux have an opinion on its default likelihood in the medium term?

(23-11-2017, 10:37 AM)tanjm Wrote: This retail bond is currently at 0.89 (ask) on SGX. It is callable on 2020 or it resets at 4Y SOR + 4.2% (with a step up of 2%). The reset rate makes it likely to be called.

At this price, it is a yield to call of 11.4%. All this is pretty tasty.

I realise that Hyflux has issues, but this kind of yield is hard to ignore and possibly worth devoting a small part of the portfolio to it.

Does any one who follows Hyflux have an opinion on its default likelihood in the medium term?

After what happens to all those bonds from the O&G, anything is possible as far as default is concerned 2020 is still too far for my liking and risk is high. i would rather go for the 6% CPS instead as the step up rate to 8% is in april 2018. This one more likely to be recalled first.  the cps currently trading at 94.7.

(23-11-2017, 10:52 AM)Jacmar Wrote:

(23-11-2017, 10:37 AM)tanjm Wrote: This retail bond is currently at 0.89 (ask) on SGX. It is callable on 2020 or it resets at 4Y SOR + 4.2% (with a step up of 2%). The reset rate makes it likely to be called.

At this price, it is a yield to call of 11.4%. All this is pretty tasty.

I realise that Hyflux has issues, but this kind of yield is hard to ignore and possibly worth devoting a small part of the portfolio to it.

Does any one who follows Hyflux have an opinion on its default likelihood in the medium term?

After what happens to all those bonds from the O&G, anything is possible as far as default is concerned 2020 is still too far for my liking and risk is high. i would rather go for the 6% CPS instead as the step up rate to 8% is in april 2018. This one more likely to be recalled first.  the cps currently trading at 94.7.

I certainly would not shell out 250k a pop for a non-retail bond. The O&G example involves a bunch of people who either over-concentrated their portfolio (for the smaller ones) or for whom O&G is a diversifier in a much larger portfolio.

But a much smaller amount in a retail bond could be acceptible. Thanks for the nod to the CPS - I'd overlooked that. But the volume seems to be very low. My guess is investors holding till call.

I think have to be aware of a few risks when buying. Don't see this as a 'free lunch'

1) Risk that Hyflux doesn't call. The step up of 2% is somewhat harsh, but what are the ways that Hyflux can raise the cash to call?

2) Risk that Hyflux doesn't call and stops paying. If the 2% step up is too harsh, they can choose to stop paying entirely as long as no dividends are paid. Note that the dividends have dwindled.

I just dipped my toes in the other retail tranche that is callable April next year. Of course the yield to call isn't as tasty as the one callable in 2020.

(23-11-2017, 11:36 PM)wonghw12 Wrote: I think have to be aware of a few risks when buying. Don't see this as a 'free lunch'

1) Risk that Hyflux doesn't call. The step up of 2% is somewhat harsh, but what are the ways that Hyflux can raise the cash to call?

2) Risk that Hyflux doesn't call and stops paying. If the 2% step up is too harsh, they can choose to stop paying entirely as long as no dividends are paid. Note that the dividends have dwindled.

You are right that there is no free lunch. This is why the yield has shot up to justify the high risk.

what's the possibility of Hyflux not paying the coupon? Well for the 6%CPS it is cumulative meaning if you miss this one you have to pay it up next time unless you intend to default in which the mother share will go to hell. You can actually protect the down side by shorting the mother share.

(24-11-2017, 09:44 AM)kichialo Wrote: I just dipped my toes in the other retail tranche that is callable April next year. Of course the yield to call isn't as tasty as the one callable in 2020.

Assuming both are called at maturity:

[Image: mhvofn.jpg]

Looking at Hyflux's highly geared B/S (including the $494.8m perpetuals) and losses - including cash losses! - in the last 3 quarters...
http://infopub.sgx.com/FileOpen/Hyflux%2...eID=477543
Are we talking about a potential real refinancing risk situation for holders of Hyflux's debt securities?

<vested in the hyflux preference shares>

IMO, there is a higher chance of Hyflux redeeming its 2018 Preference shares. This is because the company is receivng an additional 95 mil in cashflow from its sale and leaseback of its tuas property. This brings its cash total to 310mil. Hyflux needs only about 150mil to run its ops. This means the possibility of seeking 250 mil more cash to redeem the 400 mil in preference shares.

Given how reliant Hyflux is on debts, should they be unable to redeem the preference shares; it may affect confidence of bankers in the company causing a spike in borrowing cost and cut in credit facility. Given this, I think it is highly likely Hyflux will attempt to redeem the 400 mil wroth of preference shares to maintain confidence. Otherwise, it will become another Noble, albeit this time it has quite a significant amount of asset such that equity holders will be able to get a significant amount of capital back

IMO, this is not applicable to ordinary shareholders because I think a fire sale will leave them with a worthless share certificate.

I sold off mine some time back. However I can get much better returns in many counters that time without the risk Hyflux is facing.
I am proud SG has Hyflux. But Investment is not about national pride.