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Singapore Bonds
- Thread starter Runifyouhaveto
- Start date
SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds
FAQs
2. What are the risks?
You still risk capital loss
Capital loss is smaller than equity investments. But in the event that the company goes bust, you still risk losing part or all of your investment.
- It is perpetual, technically Hyflux can choose to continue to service it's interest obligations without returning the principal.
However, you will notice a heavy self-imposed penalty if they choose not to fully redeem their bond after Year 4. This is a hint to investors that the company will try its best to redeem this bond after Year 4. In bond market context, the decision to NOT call back perpetual debts in first Call-Date with self-imposed penalty will also send its credit ratings diving.
- Hyflux's business-model requires a lot of debts.
Unhealthy companies become heavily indebted because of losses. Hyflux is also heavily in debt, because of 2 primary reasons. Firstly, they have an asset-light business model to take advantage of the low-interest rates environment and embarked on share buy-back programs in recent years. Hyflux a lot have low-risk water projects which generates a safe and regular income stream from Singapore and rich gulf countries eg. Oman & Saudi. Their bigger risk are from riskier middle east countries such as Egypt, Algeria, etc. These projects appears to be funded by Hyflux's debts (the more fundings they secure, the more the more projects they can embark on). Secondly, they delisted the Hyflux Water Trust in early 2010s to take advantage of its cheap valuation (8 to 11% annual yield before delisting) after Lehmen Crisis and in return, issued the old Hyflux 6% preference shares and plain-vanilla bonds at 3.9% to 4.6%.
- Hyflux does not 100% guarantee you coupon payment
The main difference between perpetual and plain-vanilla bonds is that rightfully, the company can choose not to pay you the interests if they are broke. But again, a single deference of interest payable is as good as a debt default that will send its credit rating crashing. Therefore, no mentally-sound management will do that. In addition, Hyflux included cumulative coupon payment feature which means that if they don't pay you the coupon, they can't pay any dividends to ordinary shareholders until they fully reimbursed you first (plus penalty interests) in future.
Take Note: As long as there are SERIOUS self-imposed penalty + cumulative coupon payment feature, perpetual bonds are quite similar as plain vanilla bonds. New Banks Perpetual Bonds (Additional Tier-1 Preference Shares) are more toxic in structure because they are NOT ALLOWED to include cumulative coupon feature.
FAQs
2. What are the risks?
You still risk capital loss
Capital loss is smaller than equity investments. But in the event that the company goes bust, you still risk losing part or all of your investment.
- It is perpetual, technically Hyflux can choose to continue to service it's interest obligations without returning the principal.
However, you will notice a heavy self-imposed penalty if they choose not to fully redeem their bond after Year 4. This is a hint to investors that the company will try its best to redeem this bond after Year 4. In bond market context, the decision to NOT call back perpetual debts in first Call-Date with self-imposed penalty will also send its credit ratings diving.
- Hyflux's business-model requires a lot of debts.
Unhealthy companies become heavily indebted because of losses. Hyflux is also heavily in debt, because of 2 primary reasons. Firstly, they have an asset-light business model to take advantage of the low-interest rates environment and embarked on share buy-back programs in recent years. Hyflux a lot have low-risk water projects which generates a safe and regular income stream from Singapore and rich gulf countries eg. Oman & Saudi. Their bigger risk are from riskier middle east countries such as Egypt, Algeria, etc. These projects appears to be funded by Hyflux's debts (the more fundings they secure, the more the more projects they can embark on). Secondly, they delisted the Hyflux Water Trust in early 2010s to take advantage of its cheap valuation (8 to 11% annual yield before delisting) after Lehmen Crisis and in return, issued the old Hyflux 6% preference shares and plain-vanilla bonds at 3.9% to 4.6%.
- Hyflux does not 100% guarantee you coupon payment
The main difference between perpetual and plain-vanilla bonds is that rightfully, the company can choose not to pay you the interests if they are broke. But again, a single deference of interest payable is as good as a debt default that will send its credit rating crashing. Therefore, no mentally-sound management will do that. In addition, Hyflux included cumulative coupon payment feature which means that if they don't pay you the coupon, they can't pay any dividends to ordinary shareholders until they fully reimbursed you first (plus penalty interests) in future.
Take Note: As long as there are SERIOUS self-imposed penalty + cumulative coupon payment feature, perpetual bonds are quite similar as plain vanilla bonds. New Banks Perpetual Bonds (Additional Tier-1 Preference Shares) are more toxic in structure because they are NOT ALLOWED to include cumulative coupon feature.
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bro run, you serious??!! haha...i dun believe.
Yes Sir, I don't care about politics anymore
Good brother, since nobody cares, why should we.
Just be selfish, protect your loved ones and yourself. Don't care about the world my friend.
ah RUN is a walking zombie now.
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SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds
ISSUER: Hyflux Ltd (“Issuer”)
STATUS: Direct, unconditional, subordinated and unsecured
TENOR: Perpetual, Callable after 4 Years.
CALL OPTION: To redeem all (and not some only) of the Perpetual Capital Securities (the “Securities”) on 27 May 2020 or any distribution date \
thereafter at par, together with distribution accrued, if any, to (but excluding) the date fixed for redemption
DISTRIBUTION: 6.00% p.a. subject to reset from and including 27 May 2020 & each successive date falling every 4 years thereafter based on prevailing SGD 4Y SOR plus the Initial Spread plus the Step-Up Margin
INITIAL SPREAD: 420 bps
STEP-UP MARGIN: 200 bps
DISTRIBUTION PAYMENT: Semi-annually in arrear, actual/365 (fixed)
DISTRIBUTION DEFERRAL: At issuer’s discretion. Any deferred distributions are cumulative and on a compounding basis
DIVIDEND PUSHER: Yes, with 6 month look back period
DIVIDEND STOPPER: Yes
OTHER REDEMPTION: At par for taxation reasons, accounting reasons, tax deductibility reasons and in the case of minimal outstanding amount
DENOM: S$1,000 each or in integral multiples thereof
Retail Application Closing Date: Noon, 25th May 2016
MINIMUM SUBSCRIPTION: S$2,000 in aggregate principal amount of Securities per application or such higher amounts in integral multiples of S$1,000 thereof
need advice, bro run, many thanks!
INITIAL SPREAD: 420 bps - who derived the spread?
STEP-UP MARGIN: 200 bps - is this considered a fair value?
DISTRIBUTION PAYMENT: Semi-annually in arrear, actual/365 (fixed) - i thought normally is every quarter of a year?
DISTRIBUTION DEFERRAL: At issuer’s discretion. Any deferred distributions are cumulative and on a compounding basis
DIVIDEND PUSHER: Yes, with 6 month look back period - what is this pusher in layman term?
DIVIDEND STOPPER: Yes - what time frame, eg. anually??
dun lose hope, i am in OZ now. processing my PR now. cheers.
SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds
FAQs
3. Will it be well-received by investors?
Let me answer this in 4 different views:
- DOW is almost 18000. Comparing against shares that offer 6% dividends, Hyflux 6% has lower risk of capital loss in the next 4 weeks.
- Interest Rate is likely to be low in the next few years. Investors will still be very hungry for higher yields returns with minimal risk exposure. With the popularly of bond-financing (cost about 2%pa) for retail investors from some brokerages, I expect a rush for the new Hyflux 6%.
- Last week, the private placement of the same bond was completed. It was 400% oversubscribed.
Hyflux perpetual securities sees strong demand for its placement tranche; public offer still open
http://www.straitstimes.com/busines...-sees-strong-demand-for-its-placement-tranche
Retail Application closing is on Noon, 25th May 2016
- The old Hyflux 6% is trading at 2.5% above par (minimal accrued interests now as they just paid interests a few weeks ago) which is a sign of strength
Retail Examples above par:
DBS 4.7%
OCBC 5.1%
Retail Examples below par:
Oxley 5.15%
Aspial 5.25%
Perennial 4.55%
The above examples are not exhaustive.
FAQs
3. Will it be well-received by investors?
Let me answer this in 4 different views:
- DOW is almost 18000. Comparing against shares that offer 6% dividends, Hyflux 6% has lower risk of capital loss in the next 4 weeks.
- Interest Rate is likely to be low in the next few years. Investors will still be very hungry for higher yields returns with minimal risk exposure. With the popularly of bond-financing (cost about 2%pa) for retail investors from some brokerages, I expect a rush for the new Hyflux 6%.
- Last week, the private placement of the same bond was completed. It was 400% oversubscribed.
Hyflux perpetual securities sees strong demand for its placement tranche; public offer still open
http://www.straitstimes.com/busines...-sees-strong-demand-for-its-placement-tranche
Retail Application closing is on Noon, 25th May 2016
- The old Hyflux 6% is trading at 2.5% above par (minimal accrued interests now as they just paid interests a few weeks ago) which is a sign of strength
Retail Examples above par:
DBS 4.7%
OCBC 5.1%
Retail Examples below par:
Oxley 5.15%
Aspial 5.25%
Perennial 4.55%
The above examples are not exhaustive.
welcome back, runifyouhaveto! there is a htr thread. please comment.
need advice, bro run, many thanks!
INITIAL SPREAD: 420 bps - who derived the spread?
STEP-UP MARGIN: 200 bps - is this considered a fair value?
DISTRIBUTION PAYMENT: Semi-annually in arrear, actual/365 (fixed) - i thought normally is every quarter of a year?
DISTRIBUTION DEFERRAL: At issuer’s discretion. Any deferred distributions are cumulative and on a compounding basis
DIVIDEND PUSHER: Yes, with 6 month look back period - what is this pusher in layman term?
DIVIDEND STOPPER: Yes - what time frame, eg. anually??
Sorry brother, I just summarize, ah RUN is only capable of explaining in simple england:
It means that the yield for first 4 years is 6%pa. In the event that they don't fully redeem the bond four years later, the new yield is probably must higher than 6% based on this simple formula: May 2020 4YR SOR (eg. 2%) + Initial Spread (4.2%) + Step-up (2%) = appx 8% or more.
The second part explains that bond coupon will be paid semi-annually (common industrial practice) and the remaining refers to the following point that i mentioned earlier:
"if they don't pay you the coupon, they can't pay any dividends to ordinary shareholders until they fully reimbursed you first (plus penalty interests) in future. "
These are common features from company (not Bank AT1 Bond) perpetual bonds which are like heavy self-imposed penalties to hint to investors that while the bond is technically perpetual (they can't don't redeem back), but they will try their very best to do so in first Call-Date (4 years later for Hyflux 6%)
Hello Dragon bro!
Hope all is well and I read that you are starting new business
Hope you huat big big!
thks for the info., cheers!
SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds
FAQs
4. Will my Hyflux 6% crash when interest rates increase?
- If interest rates increases = 4YR SOR increases, it means that the penalty is even more painful for Hyflux if they don't redeem the bonds in 2020. This is a nice advantage that investors of perpetual bonds with step-up feature enjoys.
- If interest rates increases, textbooks tell us that bond prices will crash. In the earlier pages of this thread, I shared that Apple saw its bonds trading below par because the yield that they offered is too low. So when interest rates edges up marginally (a little bit), the Apple bond will crash. So long the company don't crash and the yield is higher, it offers more safety buffer against capital loss. Let's look within the same company, assuming you have a plain vanilla 4% hyflux bond vs a hyflux 6% bond of similar maturity, you will likely see smaller capital loss if you need to offload the bond before maturity or first Call-Date. No issue if you hold till maturity.
- If interest rates increase by a huge margin, then equities will be badly affected. Maybe bond of Company A will only drop 5% when the shares of the same company drops 35% percent. Although you may suffer a small capital loss if you offload the bond but the purchasing power of your money increases significantly (switch to equities or properties).
FAQs
4. Will my Hyflux 6% crash when interest rates increase?
- If interest rates increases = 4YR SOR increases, it means that the penalty is even more painful for Hyflux if they don't redeem the bonds in 2020. This is a nice advantage that investors of perpetual bonds with step-up feature enjoys.
- If interest rates increases, textbooks tell us that bond prices will crash. In the earlier pages of this thread, I shared that Apple saw its bonds trading below par because the yield that they offered is too low. So when interest rates edges up marginally (a little bit), the Apple bond will crash. So long the company don't crash and the yield is higher, it offers more safety buffer against capital loss. Let's look within the same company, assuming you have a plain vanilla 4% hyflux bond vs a hyflux 6% bond of similar maturity, you will likely see smaller capital loss if you need to offload the bond before maturity or first Call-Date. No issue if you hold till maturity.
- If interest rates increase by a huge margin, then equities will be badly affected. Maybe bond of Company A will only drop 5% when the shares of the same company drops 35% percent. Although you may suffer a small capital loss if you offload the bond but the purchasing power of your money increases significantly (switch to equities or properties).
SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds
FAQs
5. What are the chances of Hyflux going bust?
Generally speaking, not likely. The company still brings in a respectable profit margin after servicing their debts. Debt's interest servicing is not an issue because some projects are in low-risk rich countries with a regular stream of income, (riskier in African states). Ms Olivia Lum appears to be interested in tightening her control over this company by embarking on millions of share buy-backs in recent years from the open market. The cashflow is negative because of the wild-swings caused by project-disposals (there might be more project disposals in the pipeline according the company disclosures, assets-held-for-sale is about $211 million). The project that they won last year for tuas waste-to-energy project is already double of the company's market capitalization. The cash-in-hand is quite high at $181 million (probably to prepare for some bond redemptions). Lastly, as a sign of confidence, $20 million of the new 6% issue put aside for Employees and management of Hyflux.
FAQs
5. What are the chances of Hyflux going bust?
Generally speaking, not likely. The company still brings in a respectable profit margin after servicing their debts. Debt's interest servicing is not an issue because some projects are in low-risk rich countries with a regular stream of income, (riskier in African states). Ms Olivia Lum appears to be interested in tightening her control over this company by embarking on millions of share buy-backs in recent years from the open market. The cashflow is negative because of the wild-swings caused by project-disposals (there might be more project disposals in the pipeline according the company disclosures, assets-held-for-sale is about $211 million). The project that they won last year for tuas waste-to-energy project is already double of the company's market capitalization. The cash-in-hand is quite high at $181 million (probably to prepare for some bond redemptions). Lastly, as a sign of confidence, $20 million of the new 6% issue put aside for Employees and management of Hyflux.
SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds
FAQs
6. Is the interest income tax-free? What happens after I buy and how to I buy more or sell before Maturity/First Call-Date?
The coupon is likely tax-exempted. It will be payable and credited to your bank account or cheque like your ordinary shares dividends every 6-months.
If you wish to buy or sell after listing, before maturity/first call-date, you can trade in small denominations like shares in the open market which prices in accrued interests. The price you get for buying or selling includes accrued interests. (Excluding broker commission)
For larger denominations, you can also trade this new bond in secondary market through your bank RM or remisier. Please kindly note that all prices in secondary market, exclude accrued interests.
FAQs
6. Is the interest income tax-free? What happens after I buy and how to I buy more or sell before Maturity/First Call-Date?
The coupon is likely tax-exempted. It will be payable and credited to your bank account or cheque like your ordinary shares dividends every 6-months.
If you wish to buy or sell after listing, before maturity/first call-date, you can trade in small denominations like shares in the open market which prices in accrued interests. The price you get for buying or selling includes accrued interests. (Excluding broker commission)
For larger denominations, you can also trade this new bond in secondary market through your bank RM or remisier. Please kindly note that all prices in secondary market, exclude accrued interests.
no longer the same happy feet :p
is hyflux considered a junk bond?at 6 percent interest rate,its within the range of junk bond status.
hyflux is 1.1b in debt versus their 500mil in market cap,are they even profitable enough to sustain 1.1b of debt at 5 to 6 percent interest?apparently they are still making a profit of about 40 mil after tax.do they have any plans on bringing down their debt ratio in the long run?
also if olivia lim is embarking on millions of share buy backs in the recent years,why is the share price dribbling to oblivion?hyflux has market cap of 500 mil and a enterprise value of 1.5b which means they have twice as much debt as their company is worth?
hyflux is 1.1b in debt versus their 500mil in market cap,are they even profitable enough to sustain 1.1b of debt at 5 to 6 percent interest?apparently they are still making a profit of about 40 mil after tax.do they have any plans on bringing down their debt ratio in the long run?
also if olivia lim is embarking on millions of share buy backs in the recent years,why is the share price dribbling to oblivion?hyflux has market cap of 500 mil and a enterprise value of 1.5b which means they have twice as much debt as their company is worth?
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if its oversubscribed,couldnt hyflux issue bonds at a lower rate?like singapore government bond at 2.3 percent.i heard singapore government bond was undersubscribed even though its redeemable anytime at no penalty.even better than cpf.sinkies just love to chase high dividend yields and interest rates thats all.
SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds
ISSUER: Hyflux Ltd (“Issuer”)
STATUS: Direct, unconditional, subordinated and unsecured
TENOR: Perpetual, Callable after 4 Years.
CALL OPTION: To redeem all (and not some only) of the Perpetual Capital Securities (the “Securities”) on 27 May 2020 or any distribution date \
thereafter at par, together with distribution accrued, if any, to (but excluding) the date fixed for redemption
DISTRIBUTION: 6.00% p.a. subject to reset from and including 27 May 2020 & each successive date falling every 4 years thereafter based on prevailing SGD 4Y SOR plus the Initial Spread plus the Step-Up Margin
INITIAL SPREAD: 420 bps
STEP-UP MARGIN: 200 bps
DISTRIBUTION PAYMENT: Semi-annually in arrear, actual/365 (fixed)
DISTRIBUTION DEFERRAL: At issuer’s discretion. Any deferred distributions are cumulative and on a compounding basis
DIVIDEND PUSHER: Yes, with 6 month look back period
DIVIDEND STOPPER: Yes
OTHER REDEMPTION: At par for taxation reasons, accounting reasons, tax deductibility reasons and in the case of minimal outstanding amount
DENOM: S$1,000 each or in integral multiples thereof
Retail Application Closing Date: Noon, 25th May 2016
MINIMUM SUBSCRIPTION: S$2,000 in aggregate principal amount of Securities per application or such higher amounts in integral multiples of S$1,000 thereof
Hi ah run, it's good to see you back.
The orderbook is about S$3.5bn, almost 95% of the revenue are municipal (government projects), that why investors and banks are willing to finance their projects. 60% are from Singapore and China govt and a good portion of the remaining 40% revenue are from rich gulf states like Saudi Arabia and Oman. Lastly, many listed company has huge debt programs, sometimes that are larger than their market capitalization, please google: Medium Term Note Programme Singapore, many are in the range of $500m to $1.5bn.
I refer to my answer in reply #682 in this thread:
Unhealthy companies become heavily indebted because of losses. Hyflux is also heavily in debt, because of 2 primary reasons. Firstly, they have an asset-light business model to take advantage of the low-interest rates environment and embarked on share buy-back programs in recent years. Hyflux a lot have low-risk water projects which generates a safe and regular income stream from Singapore and rich gulf countries eg. Oman & Saudi. Their bigger risk are from riskier middle east countries such as Egypt, Algeria, etc. These projects appears to be funded by Hyflux's debts (the more fundings they secure, the more the more projects they can embark on). Secondly, they delisted the Hyflux Water Trust in early 2010s to take advantage of its cheap valuation (8 to 11% annual yield before delisting) after Lehmen Crisis and in return, issued the old Hyflux 6% preference shares and plain-vanilla bonds at 3.9% to 4.6%.
I refer to my answer in reply #692 in this thread:
Generally speaking, not likely. The company still brings in a respectable profit margin after servicing their debts. Debt's interest servicing is not an issue because some projects are in low-risk rich countries with a regular stream of income, (riskier in African states). The cashflow is negative because of the wild-swings caused by project-disposals (there might be more project disposals in the pipeline according the company disclosures, assets-held-for-sale is about $211 million).
According to the latest Q1 results, cashflow is negative but much better than the year before and there are $211 million worth of assets identified for near-time disposal + $181million cash-in-hand.
I believe the share drop due to general market weakness, eg. DBS crashed from $20 to $14+ within a year. Of course, the earnings is weaker despite being profitable. Lastly, I refer to my earlier reply above, to explain about their continued ability to obtain support for their debts:
The orderbook is about S$3.5bn, almost 95% of the revenue are municipal (government projects), that why investors and banks are willing to finance their projects. 60% are from Singapore and China govt and a good portion of the remaining 40% revenue are from rich gulf states like Saudi Arabia and Oman. Lastly, many listed company has huge debt programs, sometimes that are larger than their market capitalization, please google: Medium Term Note Programme Singapore, many are in the range of $500m to $1.5bn.
Disclaimer: As of today, I do not own any Hyflux shares or bonds but I will be apply for this new issue. I am just sharing my take and I am not financially trained and there are risks involved in all investments, including bonds. Please find out more from your RM or stockbroker.
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