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 ?
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.
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.
Credit Suisse has issued CHF6bn of coco bonds to current stockholders and USD2bn (EUR1.
The contingent convertible bonds-known as coco bonds will be issued with a future coupon lower than the Tier I notes, Credit Suisse said.
Today's paper uses a Merton based approach to price existing CoCo bonds, where the conversion triggers are at the 5% level.
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
CoCo bonds worth over EUR1tn will be issued by banks as they respond to new Basel III requirements over the coming years, said Davide Serra, founding partner of Algebris Investments.