We concluded the previous publication on SGD corporate perpetuals in this column (Issue 1051, Sept 5, 2022) with “Diamonds are forever, perpetuals may be likewise”. The permanency of perpetuals has been further enshrined as more issuers have since chosen to skip the first call of their perpetuals, including MAPLSP 3.95%-PERP, FPLSP 4.38%- PERP, GUOLSP 4.6%-PERP, ARASP 5.65%-PERP, MLTSP 3.65%-PERP (which has since reset to MLTSP 5.2074%-PERP) and EREIT 4.6%- PERP (which has since reset to EREIT 6.632%-PERP).
Economics continues to be a primary driver persuading issuers to exercise (or skip) the redemption of their perpetuals. We reiterate that perpetuals which are not structured with resets at the first call date provide an economic disincentive for issuers to skip the redemption, given rising interest rates. While resets are not a panacea, as evidenced by the noncall of MLTSP 3.65%-PERP and EREIT 4.6%-PERP, holders could take advantage of rising interest rates as distribution rates are reset higher. Another feature is the presence (or absence) or step-ups; thus far, perpetuals not redeemed on the first call date are not structured with step-ups on the first call date, aside from issuers who defaulted.
