Barclays Sells $2 Billion of Its First Tier 1 CoCos on New Rules

Barclays Plc (BARC), the second-biggest U.K. lender by assets, priced $2 billion of its first junior bonds that meet new regulations on bank capital.

The lender sold undated, contingent convertible bonds that will turn into equity if its Tier 1 capital ratio falls below 7 percent of risk-weighted assets, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The notes, which pay 8.25 percent, are the first from a U.K. bank and the fourth issue in Europe.

Banks are remaking their capital structures to include a series of buffers that can be used to cushion against losses, restore the issuer as a going concern, or fund its winding up, all without calling on taxpayers. The notes from London-based Barclays may herald a wave of issuance, independent research firm CreditSights Inc. said in a Nov. 11 report.

“A coupon above 8 percent is the important thing,” said Daniel Bjork, who runs the $145 million Swisscanto Bond Invest CoCo fund. “Two billion dollars looks on the high side.”

Banco Bilbao Vizcaya Argentaria SA, the second-largest Spanish bank, issued the first so-called additional Tier 1 note in May this year, paying a 9 percent coupon on a $1.5 billion deal. It was followed by Societe Generale SA (GLE) with a $1.25 billion note paying 8.25 percent, and Banco Popular Espanol SA (POP), which raised 500 million euros ($672 million) paying 11.5 percent. Popular’s was the first additional Tier 1 transaction in the single currency.

To contact the reporter on this story: John Glover in London at

To contact the editor responsible for this story: Shelley Smith at

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.