- CoCo bonds were created after the crisis to prevent bailouts
- Value of bank CoCos are falling amid concern about payments
Deutsche Bank AG’s attempts to reassure investors about its ability to pay its debts have shone a spotlight on a type of security that didn’t exist as recently as three years ago. Here’s what you need to know about CoCo bonds. For more background, check out our QuickTake.
QuickTake Contingent Convertibles
Deutsche Bank may struggle to pay coupons to investors in its Additional Tier 1 securities, also known as CoCos, in 2017, analysts at CreditSights Inc. wrote Monday. This helped trigger a sell-off in the bank’s shares and bonds, while the cost to insure against a default on its debts climbed. The bank issued a statement saying it had plenty of capacity to make the interest payments.