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.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s