Contingent Convertible

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Contingent Convertible

A convertible bond in which the price of the underlying stock must reach a certain level before conversion is allowed. All convertible bonds have a conversion price, that is, the price one pays in order to exchange the bonds for stocks. Contingent convertible bonds, however, have a second, higher price that the underlying stock must meet before a bondholder is allowed to convert. For example, the conversion price for a convertible bond may be $10 per share, but if the stock price is below $20 per share, the investor may not convert the bond.
References in periodicals archive ?
For example, the total volume of Conditional Convertible Bonds, known as CoCo Bonds, a type of hybrid security, is expected to reach EUR 200 Billion by the end of 2015.
While detailing its living will to the US Federal Reserve, Credit Suisse said it had a mixture of coco bonds and loss-absorbing bonds known as TLAC.
The investors bought the high-yield Coco bonds (earning higher interest rate than was paid on bank deposits) in 2010 and 2011, but were outraged when interest payments were suspended, after the Greek haircut inflicted big losses on both banks, and value of the bonds fell.
Last month, the bank introduced 151 mln new shares that arose from the conversion of company convertible (CoCo) bonds, with only 25 mln CoCo bonds remaining outstanding.
Germany-based Aareal Bank has hired banks to sell its inaugural CoCo bonds.
Here the CoCo bonds would turn to equity if the capital ratios of the banks fall below a pre-determined trigger level.
Today's paper uses a Merton based approach to price existing CoCo bonds, where the conversion triggers are at the 5% level.
CoCo bonds may be converted into equity when certain conditions trigger that reaction, and it is likely to be approved by the Basel Committee to help meet tougher capital rules.
Coco bonds are bonds that can be converted into capital in case of financial stress being faced by the company.
Global Banking News-August 28, 2014--Santander and UniCredit to sell CoCo bonds
Last month, the bank raised 594 mln euros in fresh funds from the exercise of a rights issue and the conversion of its Coco bonds, escaping the need for any government support.
Global Banking News-March 25, 2014--HSBC intends to sell CoCo Bonds