Financial Times – 11/13/13
“When I consider buying a bond, it is important to have some degree of comfort the issuing entity will pay some of my money back even if it goes into default,” said Michael Kastner, a principal at Halyard Asset Management. “The coco structure defeats that purpose.”
Such criticism has not deterred banks as demand has been buoyed recently by yield-hungry investors and global investors who can snap up cocos with borrowed money, bolstering their returns.
“There are always investors out there willing to turn a blind eye to weaker credit quality or higher risk in order to capture more yield,” said Mr Kastner.