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Nykredit Writes Down First CoCo as Oestjydsk Solvency Drops

Nykredit Realkredit A/S, Denmark’s largest mortgage bank, for the first time wrote down to zero contingent convertible debt it holds after the issuing bank failed to meet capital requirements.

Nykredit wrote off the value of a 50 million-krone ($9.1 million) bond issued by Oestjydsk Bank, Kim Duus, a managing director at Nykredit, said. The bond was already mostly written down as part of a capital restructuring at Oestjydsk Bank last year, he said.

“This is the first CoCo we write down entirely,” Duus said in a telephone interview. “While regrettable the loss is limited and the risks faced by Oestjydsk, or the risk we could lose money dealing with them, should come as no surprise to anyone.”

The Danish Financial Supervisory Authority after inspections last month ordered Oestjydsk Bank to take an additional 216 million kroner in writedowns. That sent the bank’s solvency ratio to 10.2 percent, below the 12.9 percent required by the FSA, Oestjydsk said in a statement yesterday.

Nykredit may be able to recover its losses if Oestjydsk rebuilds its capital to meet requirements without issuing new equity, according to Nykredit.

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