3. Able to postpone interest payments without conditions: General bonds always pay interest on time. But for perpetual bonds, the issuer has the right to postpone interest payments even if the company is profitable. which is similar to the preferred shares that are considered equity Eternal bonds are therefore formally known as “Subordinated debt instruments like equity”
This deferral of interest payments will allow investors to have a lower average return on their investment. The longer the interest payment is deferred, the lower the average return will be. But if the company postpone the interest payment for the bonds forever The company will not be able to pay dividends to shareholders. And the deferral of interest payments could damage the company’s reputation. So if the company really has no problem It is likely to pay interest on time.
4. It is a subordinated debt instrument.: Means that if the company goes bankrupt Holders of subordinated bonds will have a legal claim for repayment of debt in the 3rd order, next to holders of secured bonds and holders of senior bonds. Holding subordinated debt instruments may not be fully repaid. or if the company has no assets left at all The holder of the subordinated debt may not receive any refund at all. Eternal Bondholders Therefore, there is a higher risk of not receiving a refund than general debt instruments.
5. Eternal bonds There is no cross-default feature. (Cross-default) that is usually defined in general bonds. Therefore, if the issuer has a cross default or has defaulted on payment of other debentures other financial contracts or other creditors It will not cause the issuer to meet the conditions of default under this perpetual bond.
Click to read more : Perpetual Bond, is it worth investing in? Who is it for?
Therefore, eternal bondholders will not have the right to demand that the issuer have to pay the principal and interest This will put the bondholders forever at a disadvantage against other creditors. Because when the issuer defaults on payment of other creditors may cause that creditor to demand payment before the issuer may result in lack of liquidity Therefore, perpetual bondholders are at risk of not earning interest. The issuer may postpone interest payments. Or there may be a risk of not receiving the full amount of the principal payment if the company has to go out of business.
Who is the perpetual bond suitable for?
From the above 5 key characteristics, it can be seen that “Eternal Debentures” carry higher risk than general unsubordinated debentures. as well as having relatively low liquidity in the secondary market Therefore, it is suitable for investors with relatively high investment capital. want to split the money to spread the investment or as an investor with cold money Does not have a goal to spend money within the near term. because if you don’t want to continue It must be sold in the secondary market with relatively low liquidity.
Reference information: Thai Bond Market Association (Thai BMA)