Perpetual bonds are a hybrid debt instrument that possess similarities with bonds and equity. The key feature of a perpetual bond is that there is no maturity date. The benefit of issuing a perpetual bond for a company is that it lowers their debt leverage. For an investor, it often offers a higher yield than other forms of debt on the market.
Key learning objectives:
Define a leveraged buyout
Understand how leverage can maximise returns
Know the types of debt used in an LBO and the importance of capital structure