Santander Says CoCo Convention Is for the Birds
Don’t be fooled into thinking the Spanish bank’s decision to redeem a $1.5 billion hybrid note is a sop to angry investors. It’s a purely economic decision.
Spain's biggest bank managed to infuriate bond investors earlier this year. It would do exactly the same again if it made economic sense.
Photographer: Angel Navarrete/BloombergOn the face of it, Banco Santander SA might look as if it’s pandering to investors with the decision to redeem a $1.5 billion issue of its riskiest debt on the expected date. But it’s not. This is just the cold, hard financial logic that Spain’s biggest lender always adopts when dealing with the bond markets.
The bank infuriated many of its debt-holders back in February, when it chose to break an established convention and not redeem (or “call,” to use the industry parlance) a similar 1.5 billion euro note, known as a perpetual contingent convertible (or CoCo for short).