When it launched its perpetuals offering this year, it said a major part of the proceeds would be used to repay S$100 million of its outstanding notes due this year that it had issued under a S$1.5 billion multi-currency debt issuance programme as well as S$175 million in perpetual securities. It had sold S$175 million of perpetual securities in 2014 at 4.8 per cent, callable in 2016. Hyflux' s perpetuals traded at 89.8 Singapore cents as at Dec 8.

Hyflux has substantial net debt over equity. Its net gearing ratio was 0.56 as at end-2012, ballooned to 1.15 at end-2013, shrank back down to 0.51 at end-2014 and rose to 0.85 at end-2015. That was nowhere near as high as Swiber' s, which had net gearing of 1.59 as at end-2015 and 1.57 as at end-March this year before it collapsed. Swissco, however, had a net gearing of 0.78 as at June 30 this year. Observers have also pointed out that the 6 per cent coupon for Hyflux' s perpetuals is above its most recent figures for return on equity (ROE), which gauges how well a frim can generate profit from its shareholders' investments.

The group' s ROE was 7.1 per cent in 2012, but that dropped to 5.0 per cent in 2013, slid further to 4.3 per cent in 2014 and was even lower at 3.2 per cent for 2015, as shown by the financial history on its website. The figures were based on equity figures that included its cumulative preference shares and perpetual capital securities. The 2015 ROE was significantly lower than the 6 per cent coupon on its perpetuals.

Of course, the combination of heavy debt and negative free cash flow does not mean a company will go the way of Swiber and Swissco. Hyflux is also in a completely different industry.

Perhaps less calamitously, Swiber' s and Swissco' s bond investors mostly appear to be private banks' customers, who probably are well-heeled, sophisticated and less likely to lose all their savings if those companies default. Some may argue that high-yield perpetuals ought not to be offered to mom-and-pop investors at all.

But for savvy retail investors who have considered Hyflux' s financials before buying the perpetuals and are comfortable with the risk, high-yield perpetuals still offer the chance for them to make well-informed bets with potentially handsome rewards, and there is no reason to take away that option from them. For the rest, it is at least not too late to take another look at the numbers to make sure they are comfortable with them.