For big emerging market companies, issuing perpetuals – bonds with no expiry – is rather trendy at the moment. Earlier this week, Reliance Industries became the first Indian company to raise capital this way, with a bond yielding under 6 per cent… forever.
But, a day later and markets seem not to like it much, suggesting that the unlove for Asian perpetuals may not be confined to Chinese property issuers.
UBS’ capture of Italian dealmaker Andrea Orcel from Bank of America Merrill Lynch has paid another dividend in the form of a lead role on VTB’s $1bn perpetual bond sale, the first VTB deal the Swiss bank has worked on in over a decade.
VTB, Russia’s second largest lender, on Friday sold a $1bn perpetual Eurobond yielding 9.5 per cent to boost its core capital. It is relatively unusual for financial institutions to issue perpetual bonds, which are never paid back, and it is the first such instrument to be sold by a Russian bank.