For me perpetual debt raises many questions. Is it debt or is it equity? For the investor how do I measure my return when I cannot even guess when the loan might be repaid?
Whilst I cannot fault the companies for taking advantage of these forms of finance it is worrying that pension funds and insurers are investing in perpetuals. Surely that is a problem waiting to happen.
Global issuance of corporate bonds that may never be redeemed has surged to record levels as companies lock in finance at historically low interest rates. “Perpetual” corporate bond issuance in 2015 has hit $38bn, the highest on record for this period of the year, according to Dealogic, whose data dates from 1995. The bonds have accounted for 3.4 per cent of total corporate debt issuance, also a record. In the whole of 2014, global issuance of corporate perpetuals reached $61bn.