A floating-rate note (FRN) whose principal never matures, i.e., it doesn’t have a redemption payment and only makes perpetual coupon payments, which are reset periodically on a fixing date by reference to a benchmark rate such as 3- or 6-month LIBOR. This instrument delivers floating-rate cash flows as long as the issuer remains in business (virtually, forever). The coupon is reset and paid on a periodic basis by adding a specific spread to the reference rate.

Perpetual floating-rate notes are conventionally relied upon by financial institutions, such as banks, as a source of primary capital. In other words, although perpetual floating-rate notes are essentially debt instruments, the perpetual feature bestows on them the nature of equity. In general, perpetual floating-rate notes are classified by financial institutions as equity or quasi-equity.

A perpetual floating-rate note is also known as a perpetual floater.