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Hyflux Preference Shares 2016

Hyflux Preference SharesHyflux recently announced that they will be issuing preference shares (perpetual securities) again. The previous public offer of Hyflux preference shares was back in April 2011.

Added 19 May 2016 at 1130hrs
: This 2016 tranche is called perpetual securities unlike the 2011 issue which Hyflux called perpetual preference shares. While there are some accounting differences between the two, their investment characteristics are largely similar so I have used the two terms interchangeably. In this particular case, they also have the same seniority.

For this tranche, $230 million will be offered to the public, $20 million to staff/directors/management and $50 million to institutional investors.

The perpetual securities will be issued in denominations of $1000 and a minimum of $2000 is required for application.

They come with a distribution rate of 6% p.a. for the first four years. (6% is derived by taking 4.2% + 4-year Swap Offer Rate (SOR) on 16 May 2016)

The distributions will be paid semi-annually when, as and if declared by the Hyflux Board, on 27 May and 27 November of each year.

If the preference shares are not redeemed by Hyflux on or after 27 May 2020, the distribution rate will increase to 4.2% + 2% + 4-year SOR.

Unlike bonds, distributions of preference shares are not guaranteed. For those who do not understand the characteristics of perpetual securities (vs bonds and normal shares), you can read one of my earlier article here: https://www.martinlee.sg/preference-shares/

For the case of Hyflux preference shares, any distribution not paid (deferred) will itself earn interest (until it is eventually paid). You can refer to page 63-65 of the prospectus for the distribution terms and agreement.

Applications for the Hyflux Preference Shares may be made through the ATMs of DBS (including POSB) and OCBC, the internet banking websites of DBS at and OCBC at or the mobile banking interface of DBS.

The offer closes on 25 May 2016 at 5pm and the Hyflux preference shares are expected to be listed and traded on the Main Board of SGX from 30 May 2016.

Only cash can be used for this application as the Hyflux perpetual securities are not CPF and SRS approved. However, you can use your SRS monies to buy it from the secondary market after it has been listed.

You can download the documents of the Hyflux perpetual securities below:

Hyflux Perpetual Securities Documents

Hyflux Perpetual Securities Product-Highlights-Sheet

Hyflux Perpetual Securities OIS (Prospectus)

 

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5 comments
VSL says a few months ago

Dear Martin Lee,

Assuming Hyflux is unable to meet its coupon payout, even with deferment. In this situation, would it be better for Hyflux to redeem the perpectuals (and repay investors the principal sum borrowed)? This would avoid a default which can adversely affect its credit rating for all future biz. Tks.

Reply
    Martin Lee says a few months ago

    Hi Vsl,

    Even if Hyflux did not pay the distributions, it would not be considered a default as it is not mandatory under certain conditions. In any case, if they had the money to redeem the perpetuals, they would have more than enough money to pay the distributions.

    Reply
    VSL says a couple of months ago

    Thank you Martin for the reply.

    Reply
Leon says a few months ago

Good day Martin,

Could i kindly know if i bought these Perpetual Securities from the secondary open market (SGX) instead of subscribing to them via banks,

1) Am i still entitled to the 6% distributions?

If so,
Lets say i buy it on the open market on 25 May, pay up and its credited into my CDP account
(I understand the payouts are on 27 May and 27 November yearly.)

2) Will i get the distribution on 27 May?

Thanks!

Reply
    Martin Lee says a few months ago

    Dear Leon,

    The securities are expected to be listed on 30 May and the first payout is only in November.

    Yes, you can purchase them from the secondary market and still be entitled to the distributions, but note that the price and liquidity is subject to market forces. For example, their previous 2011 preference shares is trading at around 102 currently.

    Reply
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