SGD Bonds : Hyflux Consent Solicitation
3 Hyflux bonds affected.
1. Hyflux 5.68 09/2014 SGD 60 mio
2. Hyflux 4.29 03/2015 SGD 75 mio
3. Hyflux 3.89 01/2016 SGD 55 mio
Do not know much of the details because the warning label says its UNLAWFUL to distribute to anyone who is not a beneficial owner of the bonds
So I am not supposed to know anything except that I am guessing it is some changes to perhaps some financial covenants in their MTN programme, much like the case of Aspial. And I am supposing that the changes will be to improve their consolidated tangible net worth (to make it look better). And I am assuming there will be a reward if you agree.
I must say they are handling this a lot better than Aspial. And both of them fall into the potentially over-leveraged category.
Would invite anyone with more information to share.
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I can never understand the practice of bankers and the corporate world in this country – why can’t the issuer/ Hyflux dutifully pay each bond holder the 0.5% fee for changing the covenants and then those who are unhappy about it, can go sell their holdings after collecting the 0.5% fee. How can they issue such a short deadline for the bond holders to respond? Many could have just returned from the school mid-year holidays, struggling to settle their kids back at school. Others such as the expat community have just packed off on their wonderful summer holidays.
So that you will agree quickly and get it over with ?
By the way, if they want my kidneys, heart… ok, maybe even this corrupted brain after I’m dead, they don’t need me to “opt in” for this charitable cause – I have to “opt out” or else I will be an empty carcass one day. But when it comes to agreeing to let my debtor change the clauses in the IOU, I have to “opt in” and be rewarded with a miserable 0.5% fee. And how do I know whether these changes will be ultimately accepted? By a quorum of “yes”? So if there is not enough “yes” replies for the 0.5% fee, I now left wondering what’s going on at Hyflux that needed them to make these changes? Can I safely go on my holiday next time?
Btw, I think the fee could be taxable.
Mkt talk is that due to a change in accounting rules certain assets are now required to be reclassified as intangible assets. I suspect these may be related to BOT projects. Hyflux’s tangible net worth declined as a result, causing certain ratios to be distorted. Thus the need to change the terms and conditions of the three issues so that none of the covenants is breached.
My two cents about investing in bonds: this is an asset class that should be dominated by mega size issuers whose credit is rated. Such bond issues are often covenant light or have no covenant at all.
Without any credit rating from major rating agencies, the investors have to assess the credit of an issuer as well as the structure of the bond issue themselves. This is a specialised field but often dismissed by agents who are eager to sell and earn the commission. If all goes well nobody loses money but when the mkt hits a bump, a lot of unexpected events can occur and often these demand a lot of time to be dealt with.