THE market seems to have priced in the fact that Hyflux will not redeem its S$400 million 6 per cent retail perpetual securities, or perps, at the first call date of April 25.

After some wild price swings over the past few days, the 2018 perps of the stressed water project developer were trading at 76.7 cents to the dollar as at 11am.

A second S$500 million tranche of 6 per cent retail perps callable in 2020 traded at 61.2 cents to the dollar as at 11am.

Ang Chung Yuh, iFast senior fixed income analyst, told The Business Times that at these prices, Hyflux is unlikely to call the first tranche of perps callable in April.

 

That' s because the step-up interest rate of 8 per cent per annum that Hyflux would incur for missing the call date is " not that hefty" and actually considered " cheap" for their financial standing, he said.

 

Right now, the 2018 perps are trading at a current yield of 7.8 per cent. This is the sum of the 6 per cent annual interest payment divided by the perp' s market price. Loosely, Hyflux is already looking at a borrowing cost of close to 8 per cent on these perps.

On top of that, the 2020 perps are trading at a current yield of 9.8 per cent. In other words, if Hyflux were to issue perps of a similar structure right now, it would have to face a borrowing cost of more than 8 per cent.

Mr Ang said: " In any case, the pricing of the Hyflux bonds and perps are clearly indicating that investors have serious doubts over the company' s ability to service its debt obligations.

" I' m worried about whether they can meet their interest payments over the next 12 months."

Hyflux has another payment coming up on Sept 7, when its S$100 million 4.25 per cent Series 008 notes mature.

As at Sept 30, Hyflux held just S$66.24 million in cash, excluding cash in assets held for sale and restricted bank balances.

In October, Hyflux announced the sale and partial leaseback of its Tuas manufacturing facility. Completion of the transaction is pending approval of relevant authorities, upon which the group expectis to receive sale proceeds of S$95 million.

Hyflux told BT it will report its fourth quarter results on Feb 27 or next Tuesday.