市场反应很热烈啊。如此看来，1）以后更多公司会用这种方式搞钱，

2），其他公司搞钱时，dividend yield 会降低。


Will Hyflux's 6% dividend on prefs be the new gold?

By SIOW LI SEN

HYFLUX's first preference share issue seems to be the best thing in the stock market since slice bread going by the chatter of retirees during their morning walks at the iconic Botanic Gardens yesterday.

A day after the company launched the deal, not a few private bankers have gotten hot and bothered under the collar from being yelled at by frustrated clients who were told the allocations to Hyflux's prefs were all gone.

The fuss was of course the rich 6 per cent coupon or dividend offered by Hyflux's seven-year prefs, with an upside to 8 per cent if the prefs are not redeemed in April 2018. The hoi polloi will get their shot at the deal via ATM application at a minimum $10,000.

Not surprisingly then that, by early afternoon yesterday, the issuer's sole lead manager and bookrunner, DBS Bank, closed orders from more than 70 institutional clients which included offshore interest, as orders reached almost seven times. Yesterday's Monetary Authority of Singapore monetary policy review, which further tightened the Sing dollar, was obviously not lost on foreign investors. The Sing dollar climbed to a record $1.2491 to the US dollar from $1.2557 on Wednesday.

In a call with The Business Times, DBS's head of fixed income Clifford Lee said the bank had received orders close to $1.4 billion or almost seven times the $200 million offer size. The plan was to offer $200 million cumulative, non-voting preference shares with an option to upsize to $400 million depending on demand. Of the $400 million, the placement tranche for institutions and private banks does not exceed $200 million and retail gets $200 million.

In all likelihood, the retail tranche will receive strong demand too because it will be hard to resist the princely 6 per cent given the practically zero interest for bank savings. Singaporeans can also use part of their investible CPF monies to buy the Hyflux prefs which, at 6 per cent, beat the tier 2.5 per cent and 4 per cent interest rates paid on CPF accounts.

How did DBS arrive at 6 per cent? Mr Lee said the pricing discussions looked at Hyflux's five-year senior debt current yield of 3.61 per cent. Paying 2.4 per cent more for a seven-year debt seemed reasonable. Discussions also took Reits' yields into account as investors look to Reits to provide a stream of stable income. Top-quality Reits are yielding slightly more than 5 per cent but these are also proven investments with good liquidity.

So what are the risks? Hyflux is not paying 6 per cent for fun. Sure, raising money via prefs keeps its existing stakeholders - shareholders and bankers - happy. Shareholders don't suffer dilution and bankers are placated as Hyflux's borrowings don't rise.

Prefs investors should know that their securities rank behind senior debt which are bank loans and bonds and only ahead of shareholders. That means if Hyflux goes belly-up, banks and bondholders get paid first, prefs holders are next if there's anything left, and last in line are shareholders.

Investors tend to associate Hyflux with a utility because it builds and operates water plants. Its most recent contract was an $890 million agreement to build, own and operate Singapore's second seawater desalination facility. But it also suffered a setback in war-torn Libya. With the country's uncertain future, Hyflux will let a US$100 million contract it won last November lapse, while discussions for a potential billion-dollar deal to build two other desalination plants in Libya will not proceed.

The other risk is liquidity. So far, despite efforts by the Singapore Exchange to promote fixed income trading, which includes prefs, secondary trading remains thin.

The problem is supply. Unlike traders, investors in such instruments normally buy and hold. But Mr Lee said efforts are being made to ensure a diversified investor base in order to help liquidity. In addition, DBS will make the market when there is no buyer.

Interest rate risk is yet another factor. Currently, regional interest rates, except in Singapore, are moving up to deal with inflationary pressures. Eventually, Singapore too will see interest rates rise when the US economy begins to grow.

Will 6 per cent be the new gold? Mr Lee sure hopes so, suggesting that after Hyflux's groundbreaking issue, more corporates will follow.

“Shareholders don't suffer dilution”？
这么讲可不专业。表明上看起来普通股数没有变，但是由于发行优先股，分给普通股的盈利部分减少了。要是别的公司也这么搞，对我们普通股东可是大大的不利啊。