Cocos – credit market classics?
”Cocos” has become the user-friendly name for a new type of hybrid bond created to help UK bank Lloyds raise money from investors to break away from a government insurance scheme for bad loans.
This nickname seems to have caught on in financial circles as it is much snappier than the bonds’ official title: Enhanced Capital Notes.
The name Cocos seems to have derived from “contingent convertible,” which describes one characteristic of these bonds – they convert to equity in certain circumstances.
Coco was famously the first name of French fashion designer Chanel. She was not known for her understanding of the credit markets but she did know a thing or two about fashion and the value of tradition over new-fangledness.
One senior capital markets banker pointed out these comments she made:
“Innovation! One cannot be forever innovating. I want to create classics.”
Some bankers hope Cocos can become credit market classics, but admit that the jury is still out.