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Is that the right way to describe it? I mean the deal triggering the write down. Another way to describe it is that the write down of the AT1 bonds makes the d
by maxerickson 4y ago
Is that the right way to describe it? I mean the deal triggering the write down.
Another way to describe it is that the write down of the AT1 bonds makes the deal possible.
From a consumer standpoint, the question is really how well the actual risk of the bonds was communicated, it sounds like the contract was executed as written.
- jmyeet 4y agoI don't know the technicalities of the AT1 trigger events and conditions but it seems from the article what happened is not what AT1 holders expected to happen, which is that when the bank fell out of compliance, coco bonds turned into equity. In this case the CSFB AT1 bonds were written down to zero value and the equity holders got something. Again, I have no opinion on if this is legal or even right. Some simply didn't expect this outcome, rightly or wrongly.
- maxerickson 4y agoIt's then plain that they didn't bother to understand what they were buying. From the article: Credit Suisse’s debt-issuance documents seem to allow for stockholders coming out on top. They note that at1 bond buyers have waived any right to reimbursement in a “write-down event”. Yet the idea that stockholders may be left with something and coco holders with nothing is contrary to the understanding many buyers had about what they were purchasing: namely, a hybrid security somewhere between stocks and debt in the stack of capital. That's a bad situation if retail investors were sold those contracts without careful explanation. Sophisticated investors can enjoy their cake.