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BREAKINGVIEWS-Not only Credit Suisse can do the CoCo
March 4, 2011 / 10:01 AM / 7 years ago

BREAKINGVIEWS-Not only Credit Suisse can do the CoCo

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


I should CoCo [ID:nLDE71D0NI]

Swiss CoCo shortage [ID:nLDE71H0KS]

-- The author is a Reuters Breakingviews columnist. The opinions -- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --

-- For previous columns by the author, Reuters customers can click on [UNMACK/]

(Editing by Peter Thal Larsen and David Evans)


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