The Bond That’s Still Paying Interest, 280 Years Later

Here’s a lesson in inflation. The WSJ has an interesting story on bonds that are perpetual. They will pay interest forever as long the issuer doesn’t default. While that sounds nice, the problem is inflation will eventually eats your income away. Remember your grand-parent’s stories about how far they could go on with $1? That same dollar today lost its purchasing power. That’s inflation. It’s also a reminder that some debts never really die.

Reposted from The Wall-Street Journal

By Christopher Whittall and Georgi Kantchev

The French government has owed Marie Verrier’s family money for a long time. Almost 300 years.

All Ms. Verrier and her husband, Jean, have to do to claim the world’s oldest government debt is prove they are the descendants of an obscure 18th-century lawyer.

The question is whether it’s worth the effort: Three centuries of inflation and shifting currencies mean this debt yields just €1.20 a year, the modern-day equivalent of the long-defunct livres the bond was issued in.

“That [yield] would allow you to buy a baguette of bread once a year,” said the 81-year-old Mr. Verrier from the couple’s home in the Parisian suburb of Asnières-sur-Seine.

Bonds that never mature, or do so after a century or longer, aren’t just museum pieces. The ultralow interest rates of the last decade have encouraged governments and corporations to borrow for increasingly long periods, with some even selling 100-year bonds now.

Argentina, Mexico, Oxford University and the Wellcome Trust, one of Britain’s largest charities, have been among the issuers bonds that will mature in a century. Countries including Japan and Germany have issued so-called perpetual bonds, which never mature. Continue reading “The Bond That’s Still Paying Interest, 280 Years Later”

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Bell Aliant Bonds / BCE Offer

For those wondering, the Bell Aliant bonds will not be touched following the take over of Bell Aliant by BCE. BCE will keep the debt as is (for now).

Actually, Bell Aliant bonds should trade a little bit higher because of the better credit rating of BCE. Beyond a stronger credit rating, the financial policy at Bell (1.75–2.25x net debt/EBITDA) is more conservative than that at Bell Aliant (2.2–2.5x).

For the common shares, the voting ends on September 19 and the deal is expected to close sometime before April 2015. BCE is simply buying what it didn’t own already.

All the Bell Aliant preferred phares are exchanged for new preferred shares of BCE, with the same financial terms as the existing preferred shares.

Inside story of Obama’s struggle to keep Congress from controlling outcome of debt ceiling crisis

Here is a great read on the debt ceiling crisis situation inside the White House. Bob Woodward gives us a preview on how the game was played.

Adapted from “The Price of Politics,” by Bob Woodward
published on by Simon & Schuster.

President Obama summoned the top four congressional leaders to the White House on Saturday morning, July 23, 2011. The night before, House Speaker John A. Boehner had withdrawn from negotiations to raise the $14 trillion federal debt limit and save the government from a catastrophic default. “Nobody wanted to be there,” Boehner later recalled. “The president’s still pissed.” Continue reading “Inside story of Obama’s struggle to keep Congress from controlling outcome of debt ceiling crisis”