Investor wish-list offers no quick fix for Swiss CoCos
Some want bond doc overhaul to clarify bail-in risk, but sovereigns can always change the rules
When arranging the shotgun marriage between Credit Suisse and UBS on March 19, Swiss regulator Finma pulled the plug on Sfr16 billion ($17 billion) of Credit Suisse’s contingent convertible bonds (CoCos).
Investors were outraged. Not so much because the bonds were wiped out to buoy the bank’s capital position – a feature explicitly permitted in the bonds’ prospectus – but because equity holders were not wiped out. With the holders of additional tier 1 (AT1) bonds receiving nothing, and
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CoCos are trading at a discount on fears that European issuers won’t call the bonds. But buy-siders say this risk is overstated
