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Perpetual bonds
Re: Perpetual bonds
my understand is that the principal is perpetual, but the interest is mandatory, so I don't agree with the assessment that it's an equity instrument, because for me it is a compound instrument, with equity being the residual value. because the principal is at the issuer's discretion but the interest is mandatory and payable? in that case,
provided the interest rate is market rate, if you divide the interest amount by the interest rate, you will end up with no equity to be recognised.
I read quickly so I must've missed something.
provided the interest rate is market rate, if you divide the interest amount by the interest rate, you will end up with no equity to be recognised.
I read quickly so I must've missed something.
Re: Perpetual bonds
Similar to preference shares with principal at the discretion of the issuer and dividends are mandatory, They are not equity for the same reason.
Re: Perpetual bonds
Can you provide the exact quote specifying that the interest is mandatory?
Re: Perpetual bonds
sorry I read too quick, interest is also at the discretion of the issuer, yes, full equity I agree.