After Genting launched a perpetual bond issue that was only for institutional or high net worth investors last month, they have decided to launch one for retail investors too.
Up to S$500 million of perpetual subordinated capital securities at an issue price of S$1 will be offered to the public in Singapore. Each bond will have a minimum subscription of $5000, with increments of $1000.
If the demand is good, Genting can increase the size of the offer by another $200 million. On the other hand, if the amount raised is less than S$100 million, Genting can choose to cancel the public offer.
The bond offers a coupon of 5.125% p.a. but the coupon will rise to 6.125% p.a. if it is not redeemed after ten years. Note that Genting can choose to defer a coupon payment at anytime which makes this not 100% like a normal bond. The offer document actually calls it as a perpetual security rather than bonds.
Being a perpetual security (like a preference share), the bond will not have any maturity date. This means that the only way for an investor to exit the investment is to sell it on the secondary market at prevailing market prices.
One of the key factors of the market price will be interest rates movements. And since this is a perpetual bond, it will be quite sensitive to interest rates movements.
You can read this other article that I wrote to understand it more :
What Exactly Are Preference Shares?
Genting will have the option to recall the bonds twice a year starting from October 2017.
Application can be made by way of ATMs or internet banking belonging to DBS/POSB, OCBC and UOB. The application process starts from today and will close on 16th April 2012 at noon.
Those who are considering buying the Genting bonds for a quick punt might want to think twice as the institutional tranche is currently trading at slightly below the issue price. So any capital gains upside might be limited in the very short term.
Of course, if you are happy with an investment that pays you 5.125% p.a. despite the lack of a maturity period, you can consider this. Just remember not to put all your eggs into one basket.
Personally, I find the yield slightly on the low side.