S&P Global Ratings: Hyflux default may be first of such cases

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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. The credit ratings...

Mr Jabouley said an earnings slowdown could be an issue for Singapore issuers, which have a median leverage of close to six times.

Hyflux recently announced it would restructure its outstanding bonds, and S&P is of the view that more distress situations are likely to appear in Singapore, as more cautious investor sentiment may exacerbate refinancing risk. "However, the default of telecoms service provider PT Trikomsel Oke Tbk in 2015 highlights that even companies in defensive sectors, widely understood as having sound resilience and growth potential, are vulnerable to financial distress and default risk if they rely heavily on debt for their expansion, and do not appropriately manage their liquidity."

Third, 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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