New Developments in the Market for CoCo Bonds

Here is a link to an FT article discussing the recent issuance by Barclays of CoCo bonds, the positioning of CoCo bonds within the capital structure and some of the risks associated with this type of instrument.

Traditionally, CoCo bonds have converted to equity once a particular threshold is breached.  In contrast, the bonds recently issued by Barclays are written down to zero if the bank’s common equity tier-one ratio falls below 7%.  In return, investors receive a coupon of 7.625%, which at least one analyst has described as a “depressingly low” yield for effectively providing protection to the equity investors in a bank.

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