FINMA: GOVERNMENT SUPPORT TO TRIGGER CS AT1 SHARES WRITE-DOW...
FINMA: GOVERNMENT SUPPORT TO TRIGGER CS AT1 SHARES WRITE-DOWN
This will likely cause some mayhem.
You will start to see COCO and AT1 $Credit Suisse (CS.US)$ bonds being talked about on Fintwit, but why are they important?
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This will likely cause some mayhem.
You will start to see COCO and AT1 $Credit Suisse (CS.US)$ bonds being talked about on Fintwit, but why are they important?
COCO and AT1 bonds:
Both bonds have the same idea in mind, they are designed to provide a buffer of loss-absorbing capital to banks and are meant to convert into equity or be written down if the bank's capital levels fall below a certain threshold.
•In general, bondholders are considered safer than equity holders in the event of a company's bankruptcy or restructuring.
•Bondholders have a higher priority in the company's capital structure, which means they get paid before equity holders in the event of liquidation.
•AT1 bonds are typically considered safer than COCO bonds because they have a higher conversion/write-down trigger point, which means they are less likely to convert into equity or be written down.
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In the case of Credit Suisse, the Swiss Financial Market Supervisory Authority (FINMA) has said that government support to rescue the bank could trigger a write-down of the bank's AT1 shares, which could result in losses for investors holding those securities.
Investors are trying to assess the potential impact such write off could have on the broader financial sector through a lack of confidence that the government will support those that take on risk amidst the capital/deposits flight.
A massive amount of news is coming out this weekend.
Both bonds have the same idea in mind, they are designed to provide a buffer of loss-absorbing capital to banks and are meant to convert into equity or be written down if the bank's capital levels fall below a certain threshold.
•In general, bondholders are considered safer than equity holders in the event of a company's bankruptcy or restructuring.
•Bondholders have a higher priority in the company's capital structure, which means they get paid before equity holders in the event of liquidation.
•AT1 bonds are typically considered safer than COCO bonds because they have a higher conversion/write-down trigger point, which means they are less likely to convert into equity or be written down.
In the case of Credit Suisse, the Swiss Financial Market Supervisory Authority (FINMA) has said that government support to rescue the bank could trigger a write-down of the bank's AT1 shares, which could result in losses for investors holding those securities.
Investors are trying to assess the potential impact such write off could have on the broader financial sector through a lack of confidence that the government will support those that take on risk amidst the capital/deposits flight.
A massive amount of news is coming out this weekend.
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