Hybrids in the news

Coco Bonds Could Shift Investor Base For Bank Debt

A shift is on the horizon for the European bond market, as a new, relatively untested type of bond becomes more mainstream and alters the composition of investors who buy and own bank debt.

Haldane sips at market-based, simplified CoCo

Andrew Haldane, executive director of financial stability for the Bank of England, likes CoCos with a market based trigger

Bank of England official backs 'coco' securities for capital and bankers' pay

Andy Haldane says banks could pay staff bonuses in contingent convertible securities to improve discipline

Bank of Cyprus to proceed with €1.34 bln CoCo bonds

The Bank of Cyprus shareholders’ EGM approved Wednesday the issue of 1.34 bln euros worth of Convertible Enhanced Capital Securities, an enhanced form of contingent convertible bonds, or CoCos, which are being considered by several banks to provide an extra buffer if capital is eroded. The capital securities will convert into shares if the bank's core Tier 1 capital falls below 5%. The bonds can also be converted into shares at a 20% premium to the current share price at any point in the next five years. 

An explanatory CoCo death spiral

What happens, though, when that tail risk does emerge and investors rush to hedge the unthinkable, once it’s a bit more thinkable? Please meet the CoCo death spiral.