3 Min Read
By Neil Unmack
LONDON, March 4 (Reuters Breakingviews) - Bank of Cyprus is planning to sell contingent convertible bonds: a sign the securities aren't just for big, strong banks. But the latest variety comes with a twist: the bonds can be converted into shares in good times as well as bad. They could be a model for other lenders.
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-- Bank of Cyprus plans to sell 1.34 billion euros of enhanced capital securities, the bank said on Feb. 28.
-- The bonds will convert into shares if the bank's core Tier 1 ratio falls below 5 percent. Bondholders also have the right to convert their holdings into shares at 3.30 euros a share, a 20 percent premium to the current share price, until May 2016.
-- The bonds will be first offered to shareholders, and then to holders of Bank of Cyprus' existing hybrid debt, as well as clients and other external investors.
-- The issue will increase the bank's Tier 1 ratio to 12.7 percent from 11 percent. The euro-denominated bonds yield 6.5 percent, while dollar notes pay 6 percent. Barclays Capital and HSBC structured the deal.
-- Credit Suisse sold $2 billion of contingent capital securities in February. Investors placed $22 billion orders for the bonds, which yield 7.875 percent.
-- Bank of Cyprus statement: here
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(Editing by Peter Thal Larsen and David Evans)
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