AT1 Bonds: Death before it is due?
– Abhirup Ghosh | abhirup@vinodkothari.com
Additional Tier 1 bonds which are known by many names – AT1 bonds or Contingently Convertible Bonds (CoCo Bonds) or Perpetual Bonds, are capital structure instruments. Every liability instrument in corporate finance is essentially a capital structure instrument, that is, it is somewhere in the order of priority for its loss absorbency feature, but some of the instruments are high in the order of priorities, and therefore, their placing in the capital structure is commonly not a matter of concern. However, AT1 bonds are placed just after common equity, and therefore, if equity has suffered a meltdown, AT1 bonds will be next to be hit.
This article examines the life and death of AT1 bonds.
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