Deal of teh century?
The security is a floating rate Perpetual, payment of reference rate + 1.25% paid quarterly in perpetuity. No call dates, been on for a long time. Bottom of the queue regarding seniority (highly risky)
The current price is 71.15.
Ref rate is 3.0483%
Yield = ( 3.0483 +1.25) = 4.29%
This implies a yield on the security of ( 3.0483 +1.25) / 71.15 = 6.04% if my knowledge of valuing perpetuities ( Price = Coupon / yield)
6.04% - 4.29 % = 1.74%
CDS spread on 10 yr subordinated debt is 1.816% which is greater than 1.74%. therefore not deal of the century at all.
I feel I am not understanding something here but am unsure what it is… Please help