, Columnist
CoCo Bond Investors Face a Covid-19 Reckoning
The coronavirus pandemic is even starting to affect the highly specialized world of bank capital.
“Extraordinary market challenges.”
Photographer: Jonathan Perugia/In PicturesThis article is for subscribers only.
The Covid-19 pandemic is even starting to affect the highly specialized world of bank capital.
Lloyds Banking Group Plc, a large British lender, has just become the third European bank this year to do what was once unthinkable and decline to redeem an outstanding “CoCo” bond at its first call date. This form of hybrid debt — also known as additional tier 1 (or AT1) regulatory capital — is especially risky because the investor bears the losses if the bank fails, and it usually pays a generous interest rate.