Hyflux Redemption of Hyflux perpetual securities
In the annual reports for 2014 and 2015, Hyflux reported that the Perpetual capital securities amounted to $469,096,000.

The notes to the accounts explain the following - the perpetual capital securities do not have a maturity date and the Company is able to elect to defer making a distribution subject to the terms and conditions of the securities issue. 

Hyflux issued a prospects for the perpetual capital securities in 2016 and raised $500 million from institutional and retail investors. 

The 2016 annual report showed the the Perpetual capital securities at $790,280.000.

The notes to the accounts explained - On 27 May 2016, the Company issued perpetual capital securities with principal amount of $500,000,000 bearing distributions at a rate of 6.00% per annum. An amount of $494,794,000 net of issuance costs, was recognised in equity.

In July 2016, the Company fully redeemed perpetual capital securities with principal amount of $175,000,000 bearing distributions at a rate of 4.80% per annum.

Question: why did Hyflux decided to redeem the $175 million in perpetual securities which carry an interest rate of only 4.8% and does not have a redemption date? At that time, Hyflux probably needed the capital for meet its operations.

If they do not need the money, why did they have to accept $500 million from the 2016 issue? They could accept a lower amount.

If they have to redeem some of the perpetual securities, why do they not redeem from another tranche of perpetual securities that pay an interest rate of 5.75%?

ADDITIONAL NOTE:
I have received an explanation that the 4.8% perpetual security would step up to an interest rate higher than 6%. This is the reason for Hyflux to redeem these perpetual securities. I find the explanation to be acceptable.

Tan Kin Lian
 

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