I was initially surprised about this because AT1 notes are supposed to rank higher than equity. It seems that almost no one saw this coming (CS AT1 bonds traded higher this weekend before the write-down announcement), and traders presumed that bondholders should be made whole if equity holders get something.<p>However then I looked at the information memorandum of these AT1 bonds (e.g. <a href="https://www.credit-suisse.com/media/assets/about-us/docs/investor-relations/debt-investors/high-trigger-capital-instruments/t1-2000m-usd-2018.pdf" rel="nofollow">https://www.credit-suisse.com/media/assets/about-us/docs/inv...</a>). Credit Suisse titled their issues as "Perpetual Tier 1 Contingent
Write-down Capital Notes". Note that it's "contingent write-down" rather than the more typical "contingent convertible". The IM also doesn't contain an explicit conversion price or conditions.<p>Almost everyone would call this a "CoCo bond", even though its terms are exceedingly clear -- if CET1 falls below 7%, a Contingency Event, which is a Write-down Event, occurs, and "the full principal amount of the Notes will automatically and permanently be written-down to zero on the Write-down Date." In other IM issued by other banks I've seen, usually such event is followed by a mandatory conversion to ordinary shares rather than an immediate write-down. I wonder if this nuance was fully considered and priced in the trading of such instruments.
> "It's stunning and hard to understand how they can reverse the hierarchy between AT1 holders and shareholders," said Jerome Legras<p>Finance dude has a hard time understanding the concept of a sovereign government.<p>Makes you wonder what other first principles the world operates on he has a hard time understanding.
The Reuters article has more background information, and isn't behind a paywall:<p><a href="https://www.reuters.com/business/finance/credit-suisse-writes-down-17-bln-bonds-zero-angering-holders-2023-03-19/" rel="nofollow">https://www.reuters.com/business/finance/credit-suisse-write...</a>
every 10-15yrs. like the set interval of a ground swell, traversing the pacific ocean. Sets roll in, the surfers waiting turn and paddle hard. How unimaginative we are
And they wonder why we want to replace the traditional banking system.<p>Here’s a hint: it’s not got anything to do with either “metaverse” bs nor with silly “NFT” JPEGs.<p>Read the original Bitcoin whitepaper.<p><a href="https://bitcoin.org/bitcoin.pdf" rel="nofollow">https://bitcoin.org/bitcoin.pdf</a>