Hyflux default could signal more trouble ahead for Singapore bond market: S&P

S&P Global Ratings said the default of troubled water and power company Hyflux could be the "first wagon in a train of financial distress cases" to come in Singapore, as lending conditions adjust to the economic slowdown and become less favourable.

According to Mr Jabouley, an earnings slowdown could be an issue for Singapore issuers, which have a median leverage of close to six times. By S&P's estimates, close to S$4 billion of Singapore-dollar corporate bonds are maturing by the end of 2019. That number climbs to some US$10 billion in 2020, S&P said.Firstly, no sector is immune to financial troubles. Distressed situations in Singapore over the past two to three years have been confined to the energy and commodity sectors following volatile prices, S&P noted.

Secondly, situations can evolve quickly for companies with narrow or uncertain earnings quality. This means that lenders should do their due diligence before, and surveil their money after investing. Thirdly, losses can be harsh depending on the characteristics of debt instruments outstanding. This is because the market has seen the introduction of complex debt instruments compared with senior unsecured notes, S&P said.

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