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CoCo Loco! Spain’s Banco Popular Plunges, Suspended By Regulator and Sold To Banco Santander For 1 Euro

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

Spanish bank, Banco Popular, has been declining in price for some time thanks to plunging earnings.

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Banco Popular’s bad loans totaled 35.7 billion euros ($38 billion) at 4Q, not a good sign.  Flagging earnings and $38 billion in bad debt has resulted in declining stock prices and trading suspended by their regulator.

And The Single Resolution Board agreed to the sale of Banco Popular for One Euro to Banco Santander. But even at One Euro, Banco Santander is not seeing any “bargain surge.”

Banco Popular’s 11.5% CoCo (Contingent Convertible) bond (also known as an enhanced capital note (ECN) that is convertible into equity if a pre-specified trigger event occurs) is plunging rapidly towards zero. In other words, Banco Popular’s CoCo bond did not save the troubled bank.

Banco Popular has the distinction of having the first major bank Contingent Convertible bonds to be bailed-in/wiped out under EU regulations.

A Banco Popular CoCo bond holder.

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