Leave a Comment:
6 comments
there’re more perpetual bonds (without maturity) issues this year.
Martin – Is perpetual bond similar to preference share?
Dear sender,
not exactly. For bonds, the issuer is obligated to pay the coupons but not for preference shares.
ReplyMartin, thanks for your reply. Have another questions:
(1)Why is it some companies choose to issue preference shares while others choose perpetual bond issues?
(2)Also, should perpetual bonds pay higher coupons relative to preference shares for similar rated credit qualities?
best regards
ReplyDear Sender,
Actually, can’t really generalize. Need to refer to the term sheet for the specifics of the offer. In Genting’s case, the distributions could even be deferred! And they call it “perpetual subordinated capital securities”.
“The Securities, which will be issued in the denomination of S$250,000, will be perpetual and will confer a right to receive distribution from their issue date at the rate of 5.125% per annum, subject to a distribution rate step-up on 12 September 2022, such distribution to be payable on the Securities semi-annually in arrear, unless deferred in accordance with the Terms and Conditions of the Securities”
ReplyMartin, i agree with your point on the term sheet.
So, the Genting placement is a cumulative perpetual securities with a step-up feature.
So, to evaluate whether perpetual bonds are indeed juicy, let’s see how such securities performed in the secondary market. My understanding is that Noble had one such placement last year around Q3 period while Olam just completed one about a month ago. There may be others offered last year that I may not aware of. Now, the problem, I don’t have preview of the secondary market prices for them. Do you have access to or from your networks that can share with us how such perpetual bonds performed relative to their par values and the bid/ask spreads??
Thank you. Appreciate your hard work. best regards.
ReplyDear Sender,
your stock broker would be able to give you a list of all the Singapore bonds (and their bid/offer prices) that are traded on the secondary market. These are the $250k bonds that we can’t see on the exchange by ourselves.
Reply