Doubts are emerging once more that the Bank of Queensland may not redeem the A$200 million of its hybrid securities, known as PEPS, on the first call date, of 17 December, 2012, as many investors in the securities five years ago would have expected. If BOQ fails to redeem the PEPS, it will become the first Australian bank not to redeem a tier-one hybrid capital note at the earliest opportunity to do so.Speculation over the decision the Bank of Queensland will take concerning whether to redeem the perpetual preference shares may affect the decisions of Bendigo and Adelaide Bank, and also Suncorp over their own mooted sale of hybrid capital securities.The basis for conjecture over what choices BOQ's board and management might make is the pricing on the ASX of the bank's perpetual preference shares. The market price of the BOQ PEPS, which have a face value of $100, has fallen from a recent high of more than $93, in mid-July, to as low as A$87 earlier this month, as investors have begun to contemplate the prospect that BOQ may not redeem the notes.The price of the PEPS has dropped as low as A$77 during the last 12 months, as the fortunes of BOQ have waxed and waned. BOQ reported a loss for the first half of fiscal year 2012. The bank will release its full-year profit on October 18.PEPS is an acronym for Perpetual Equity Preference Share. It is the first word in the name that is critical here - the securities are perpetual. This is what the PEPS will be if the notes are not redeemed in December.Admittedly, BOQ has the option of redeeming the PEPS on every six-monthly coupon payment date thereafter, APRA permitting, but why should the bank redeem even in December?There is no coupon step-up that comes into play if BOQ does not redeem the PEPS in December. Everything will simply continue on as it was, except that BOQ will then have very cheap perpetual debt, on which it can pay a coupon or not, as it chooses.The payment of coupons is at the sole discretion of the bank and the coupons are non-cumulative. However, if BOQ chooses not to pay a coupon, it cannot pay a dividend on its shares nor a coupon on any equal or lower ranked debt.However, let's assume for now that BOQ continues to pay the coupons on the PEPS as they fall due. BOQ will, nevertheless, still have a very cheap debt of any type, which carries a coupon of just 200 basis points over the 180-day bank bill rate, adjusted for the tax benefit of franking credits.BOQ would have to pay a credit spread of at least 200 bps on any senior debt-raising with a reasonable term to maturity undertaken at the present time. AMP Bank paid 170 bps over the 90-day bank bill rate for three-year, senior debt in mid-July. AMP Bank is rated two notches above the BBB+ rating assigned to BOQ by Standard & Poor's.BOQ