I don't understand perpetual securities
I'm reviewing someone's portfolio and saw that they have some Bank of Nova Scotia notes. I cannot immediately grasp the appeal of these to an individual investor and am wondering what I'm missing:
From the prospectus,
The Notes have no scheduled maturity and holders do not have the right to call for their redemption. Interest on the Notes will be due and payable only at the Bank’s sole and absolute discretion and the Bank may cancel (in whole or in part) any interest payment at any time. Any cancelled interest payments will not be cumulative.
These seem like extraordinarily favorable terms to the issuer.
So I mean I guess in theory you could be left holding something that pays zilch with no ability to recoup principal (outside of selling in the secondary market) ? But I also gather that a cessation of interest payments would not be viewed favourably by investors and perhaps could affect the institution's future ability to raise capital?
From the prospectus,
The Notes have no scheduled maturity and holders do not have the right to call for their redemption. Interest on the Notes will be due and payable only at the Bank’s sole and absolute discretion and the Bank may cancel (in whole or in part) any interest payment at any time. Any cancelled interest payments will not be cumulative.
These seem like extraordinarily favorable terms to the issuer.
So I mean I guess in theory you could be left holding something that pays zilch with no ability to recoup principal (outside of selling in the secondary market) ? But I also gather that a cessation of interest payments would not be viewed favourably by investors and perhaps could affect the institution's future ability to raise capital?
