The payment of the dividends for the perpetual securities works out to S$18 million annually (based on a S$300 million issue size) and that money has to come from somewhere. 

At the moment, Hyflux’s business is burning cash (even in the first-quarter of 2016, the company’s cash flow from operations is a negative S$33.8 million, down from the negative S$26.3 million seen a year ago). 

The company could issue more shares, borrow more, or sell assets to raise cash. 

But, to borrow more would further weaken Hyflux’s already debt-laden balance sheet and thus add even more risk to the equation. 

Selling assets would not be a very palatable choice either as it could weaken the company’s ability to generate cash in the future

Hyflux has a chronic inability to generate cash flow. 

According to data from S&P Global Market Intelligence, Hyflux has been generating negative cash flow from operations in each year from 2010 to 2015. 

Meanwhile, the company currently has a net-gearing ratio (net debt to equity ratio) of 0.98, which isn’t low. 

(Note: This 0.98 figure does not account for the change in Hyflux’s cash and debt levels that could occur after it issues the new perpetual securities.)

dated 2016