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 ?
Coco bonds and loans connected to them, indebted households, lost jobs, delayed recovery and lower wages are all part of the persistent fallout from the 'cleansing event' of 2013.
Contingent convertible bonds ("CoCo bonds") are hybrid debt instruments.
CoCo bonds are bank-issued debt that converts to equity when a trigger is breached.
Markets have no difficulty valuing CoCo bonds and determining their impact on share prices.
CoCo bonds are alike traditional convertible bonds in that there is a strike price, which is the cost of the stock when the bond converts.
Because it has the capacity to write off the entirety of the debt, a bank can count coco bonds as part of the capital it must hold to satisfy regulators it is stable.
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.
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.
Credit Suisse has issued CHF6bn of coco bonds to current stockholders and USD2bn (EUR1.5bn) of the hybrid instruments to the public.
The contingent convertible bonds-known as coco bonds will be issued with a future coupon lower than the Tier I notes, Credit Suisse said.
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.
Global Banking News-September 16, 2014--Aareal Bank hires banks to sell CoCo Bonds