Case Study On Perpetual Bonds’ Redemption Right Renouncement In SG Company

Perpetual bonds is a hybrid bond that can survive forever,and the holder cannot claim the initial principal but can obtain interest on time.For the vast majority of investors,the issuer of perpetual bonds will inevitably exercise redemption rights at the end of the first life cycle.However,this "iron law" was broken by "15 SG MTN001".The purpose of this study is to provide financing decisions for companies that issue perpetual bonds in the future,as well as risk warnings for companies whose perpetual debts are about to enter the exercise period.After reviewing the domestic and foreign literature on perpetual bonds,the paper finds that due to late start,the domestic research and supporting policies related to perpetual bonds are still lagging behind.The study on the redemption and renewal of perpetual bonds is blank.At present,the perpetual debt business in China is essentially a kind of credit business.Therefore,based on the agency cost theory,the orderly financing theory and the trade-off theory,this paper adopts the case study method and analyze the reasons behind the redemption right renouncement from the macroeconomic environment,industry policy changes,and business management aspects,then use the time study method to test the market’s reaction to the behavior and reveal potential risks.Through the study of SG company case,this paper believes that the perpetual debt clause setting is beneficial to the issuer,and will be used by more enterprises in the future.Abandoning the perpetual bond redemption right is an inevitable result of the development of perpetual bond products.The main reasons for choosing to abandon are due to the tight capital chain caused by the deterioration of the business,the short-term liquidity pressure,and the high refinancing costs.The issuer should combine its operating conditions and development strategies from refinancing costs and refinancing.In terms of availability,we should consider whether the perpetual debt should be redeemed when it expires.At the same time,we must do a good job of risk management and risk control,and be vigilant to the series of potential risks brought by the interest rate jump after redemption.