Hyflux 6% CPS is not likely to be redeemed on 24 Apr 2018

I am sharing the various scenarios of Hyflux perps that is playing out in my mind. Please note that the following are my speculation as no one can predict the future.

My opinion is that Hyflux is unlikely to redeem Hyflux 6% CPS on 25 Apr 2018. This is what I think is going to happen :

  • In the month of Apr 2018, Hyflux may declare that they are not going to redeem the principal. If they do not redeem, the coupon will be reset to 8% cumulative.
  • Hyflux may pay the last 3% coupon for Hyflux  6% CPS on 24 Apr 2018.
  • Hyflux may assure investors that they will redeem as soon as they sell their TuasSpring plant, and then assure investors that they will honour the 8%.

My reasons:

  1. Its mid Feb now, and Hyflux has to file the notice by 24 Mar if they want to redeem.
  2. No news that Hyflux is anywhere near to selling their TuasSpring plant. If they do not sell, they will not have the money to redeem.
  3. Tuaspring, being a national infrastructure, cannot be owned by foreign entities. This further reduces the number of possible buyers. Not many local entities will be able to raise at least $500M to buy. Furthermore TuaSpring is a currently loss-making plant.
  4. If I were Hyflux and if I plan to redeem in Apr, I will be slowly buying up the 6% CPS shares at lower prices now, instead of waiting for Apr to redeem at 100. There is now no sign of any insider buying. This is a clear sign to me that as of today, Hyflux do not plan to redeem in Apr 2018.

I think there are 3 possible options for investors of Hyflux 6% CPS:

Option A: Hold

  • Hold till Hyflux sells TuaSpring, The terms of 6% CPS is that Hyflux can redeem any day after 24 Apr 2018.
  • Receive the last 3% and thereafter 8% per year coupons, till Hyflux redeems.
  • Be prepared that Hyflux 6% CPS price continue to drop till Hyflux clarifies the situation.

Option B: Sell and cut loss

  • Accept the loss and move on.
  • It is more important to preserve your capital.

Option C; Sell and consider buy back after 24 Apr 2018

  • If the above scenario plays out, I speculate that Hyflux 6% CPS may be about $50 after Hyflux makes the speculated announcement or after 24 Apr.
  • Why consider to buy back again? Because Hyflux is unlikely to go bankrupt.

If you are holding Hyflux and would like to have a chat with me, please contact me.

  • I'm a remisier with Maybank Kim Eng, and as a bonds and REITs investor myself, I guide my clients to build resilient bonds and REITs portfolios. If you like to be guided, please open a trading account to become my client; It's free!