Charlie McEliggott at Nomura is always worth listening to.
The complete write-down of Credit Suisse AT1’s / CoCo’s in light of the “restructuring” into UBS was the real plot-twist yesterday, particularly as equity holders actually received a small compensation, despite the capital structure assumptions of most that the credit was senior to equity (another lesson in reading the fine print of what you own—they’re called “Bail-In Bonds” for a reason).
AT1’s were CREATED to do just this after the last Euro banking crisis—a vehicle for banks to raise capital at times of stress via a callable security which offered higher yield due to its subordinated nature….but one which could absolutely take a hit on a bank failure and impose losses on creditors and avoid hitting taxpayers first.
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