RSS feedhybrid debt
’Credit Suisse’s $6.2bn Swiss finish
Credit Suisse says it just gave the latent CoCo market a $6.2bn shot in the arm.
On Monday morning the Swiss bank announced it would issue Chf 6bn ($6.2bn) of Contingent Convertible securities — or debt that will convert into equity once a certain trigger is reached.
CoCo Killers [updated]
CoCo *pops.* Curtains for CoCos. And so on.
Late on Thursday the Basel Committee released its final (and curt) rules on loss-absorbing bank capital, including the mandate that all Tier 1 and Tier 2 instruments are able either to be written off or converted into equity at the behest of regulators.
Commerzbank’s complicated capital boost
Commerzbank mystery, solved.
From a Thursday morning statement:
Commerzbank plans measure to optimise its capital structure
Today, as a step in its capital management, Commerzbank AG has provided
Anglo Irish’s burden-sharing template
On Thursday, Anglo Irish — Ireland’s euro-guzzling bailed-out bank — unveiled a dramatic exchange offer for investors in its subordinated, or junior, debt.
The bank is offering holders of some of its outstanding sub-debt to swap their notes for new Irish government guaranteed bonds that will be due in 2011 with a coupon of three-month Euribor plus 3.75 per cent.
CoCos can cost – your bonus
Here’s a data point for those skeptical of CoCo capital’s saving graces.
(CoCos, or contingent convertible capital, are a kind of convertible bond that automatically switch into equity once certain capital or bailout triggers are breached.)
Earlier this week Switzerland moved to make CoCos a key element of future bank capital,
Ireland’s subordinated bond ATTACK!
Ireland may have forsworn a default on senior bank bonds — but the subordinated stuff could turn out to be a rather different story.
On Thursday morning, Irish bank CDS shot sharply up on [UNCONFIRMED] chatter of an imminent “Allied Irish default”
Flipping the capital structure || erutcurts latipac eht gnippilF
Spotted late on Thursday — one massive change for banks’ capital structures appearing just on the horizon.
The Basel Committee published a 20-page consultative document on loss absorption in capital instruments — something that’s (finally) gaining some serious regulatory attention after the recent financial crisis.
Basel gives good CoCo
Basel goes bank CoCo nuts. Or as the Basel Committee has put it more, ah, soberly:
The Basel Committee is of the view that all regulatory capital instruments must be capable of absorbing a loss at least in gone-concern situations.
Stress test’s sovereign support = senseless
Amongst all the criticisms of the European stress tests, there’s one glaring omission.
From the Committee of European Banking Supervisors’ summary report:
Government support measures received by institutions in the sample as of end 2009 have been taken into account and subject to specific analysis (see Section 4.5 of the report).
A new type of TruPS warfare
TruPS CDOs may have escaped the full wrath of US financial reform, but they still have to deal with the rather daunting prospects of their underlying collateral — those Trust Preferred Securities (TruPS).
HSBC’s capital innovation
Bank regulators may have moved to crack down on hybrid capital, but the banks themselves seem to have other ideas.
Witness HSBC’s $3.4bn sale of perpetual bonds last week.
As Bloomberg reported:
Santander’s debt rebranding
On Monday, Santander said it was buying back as much as €2.5bn in debt, including hybrid bonds from Abbey and Alliance & Leicester, the British banks it bought in 2004 and 2008, respectively.
That same day,
CoCo tastes different in Yorkshire
There’s a much more substantial test looming on the horizon for CoCos — the new darlings of the bank capital universe.
Yorkshire Building Society announced on Tuesday that it’s set to finalise a deal to take over its loss-making rival Chelsea.
The shifting sands of UAE bank capital
Here’s some useful data from ratings agency Fitch – a breakdown of how the capital of banks in the United Arab Emirates is likely to be impacted by the Dubai World debt restructuring.
It’s basically an updated version of Fitch’s capital sensitivity test for UAE banks,
Allied Irish Banks’ burden-sharing bonus
Burden sharing for European bondholders is something the market has become extremely familiar with in recent months.
So Allied Irish Bank’s announcement on Tuesday morning, that it has agreed to the European Commission’s request that it should not make discretionary coupon payments on its Tier 1 and Tier 2 capital bonds,
The slow march of the Moody’s hybrid downgrades
Watch out for those Moody’s hybrid debt downgrades!
They are coming:
Sydney, November 17, 2009 — Moody’s Investors Service has published its revised methodology on the way it rates the hybrid securities and subordinated debt instruments issued by banks.
I should not have CoCo-ed?
As outlined in our criteria, we do not consider contingent capital securities to be a form of common equity. We can include them as hybrid equity depending on their exact features. If the conversion trigger is set at a level that we think would lead to a conversion occurring too late,
Beware the hidden hybrids
Apparently they are not always obvious, as the below press release, from Moody’s, demonstrates.
And spotting hybrids is an important issue right now given that the European Commission is determined to impose the concept of burden-sharing on bondholders — forcing them to share some of the pain involved in state bank bailouts.
Contingent capital comes to pass, with a little help from the EC
And so it began — the Lloyds statement detailing the bank’s plans to raise contingent capital is out.
This is a concept still confusing the market even as it’s gaining increasing prominence with regulators.
Burden sharing for bondholders lives!
Remember the hybrid debt, or subordinated bond, attack launched by the European Commission against certain Euro-area banks?
The Commission wanted bank bondholders to share some of the pain of government bailouts,
Capitalising on recapitalisation…
… is something that can be done by buying European banks’ Tier 1 bonds — even hybrid ones — according to Société Générale credit analysts.
The whole thesis is based, firstly, on the idea that under new regulation (the strengthened Basel II,
Presenting the Dutch RMBS Niet-oproep
The non-call risk which has haunted hybrid bonds, or subordinated debt, in recent months appears to have spread — all the way to Dutch RMBS.
Recall that a number of hybrid bonds have been downgraded recently,
`There’s no free lunch in credit anymore’
So say Deutsche Bank credit analysts Jim Reid and Nick Burns.
They’re looking into credit markets in a note out on Wednesday, and specifically whether the markets have normalised since the start of the credit crisis and the collapse of Lehman Brothers one year ago.
KBConfusion
What fresh hybrid debt hell is this?
KBC Bank has today launched tender offers in certain countries in Europe and, in respect of one security, in the United States of America to repurchase four series of outstanding hybrid Tier-1 securities with a total nominal value of approximately €1.6 billion.
Hybrid debt attack, from Moody’s
Perhaps genuinely expected by the market this time — a Moody’s downgrade of Lloyds, RBS, Allied Irish Banks and Bank of Ireland subordinated, or hybrid, debt.
On the UK side:
London, 09 September
Adventures in hybrid debt, fixed income fund edition
So who buys banks’ hybrid, or subordinated, debt?
Fixed income funds (FIFs), for a start. And S&P’s just-released report into UK FIFs makes for an interesting illustration of what’s been going on in the sector.