DealZone

 ”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.”

From this week’s Thomson Reuters Investment Banking Scorecard:

· US CORPORATE DEBT TOPS $20 BILLION, BREAKS RECORD

For the second consecutive week, the volume of corporate investment grade debt in the US market topped the $20 billion mark, bolstered by benchmark names in the energy & power and financial sectors.   Shell International Finance raised $5 billion via Morgan Stanley, Bank of America Merrill Lynch and Deutsche Bank, while Canada’s Cenovus Energy raised $3.5 billion this week.

Investment grade debt activity from non-financial issuers totals $372.3 billion for year-to-date 2009, already besting the previous all-time record for annual non-financial activity set in 2001 when $360.5 billion in new corporate issues were brought to market.

· EUROPEAN CONVERTIBLE BONDS UP 50%
While global convertible bond activity is down 46% over 2008, the market for convertible bonds in Europe has picked up dramatically, with $24.1 billion in new convertible offerings – a 50% year-over-year increase.  Issuers in the materials, financial and industrial sectors account for nearly 60% of this year’s volume in Europe.  Deals from Anglo American, Arcelor Mittal and Alcatel Lucent top the list of convertible offerings this year.

*This post was updated after the bond priced*

British Airways unveiled a $1 billion fundraising aimed at securing its future earlier on Friday, including $540 million in bank loans that had been earmarked for its pension funds as a safety net against the airline going bust.

The fundraising also included a 350 million pound ($570.5 million) convertible bond, which was over 7 times covered, pointing to healthy investor appetite.

Convertible bonds have become an increasingly important source of finance for firms in Europe. The instrument allows companies to raise capital paying less interest than standard bonds, while avoiding an immediate dilution of earnings per share because investors look to gains in share prices over a medium term.

The latest update on funds of hedge funds (FoHFs) performance arrives from Fitch Ratings -- and it makes for an unsurprisingly sober read.

We perhaps know already that 2008 was the worst year ever for FoHFs, and that cumulative losses reached an all-time high as the year ended with a Madoff-shaped bang. Fitch also raises a fear that managers have shared after imposing redemption restrictions on clients wanting to stash their cash under the proverbial mattress:

The year has witnessed a wave of managers implementing restraints on clients’ access to their assets, thus putting again into question the business and sales model of the industry