Overview

A Contingent Convertible (often known as a CoCo) is a debt instrument which converts into equity shares when circumstances require. To date, CoCos have been issued in the UK by Lloyds Banking Group plc and it has also recently been announced that Yorkshire Building Society will issue CoCos in exchange for Chelsea Building Society's subordinated debt on the merger of the two societies. Interestingly, in neither case are Cocos issued as a means of raising new cash, but rather as a new form of capital where existing investors are invited to exchange their holding of lower tier securities for CoCos. This note looks at some of the legal and market issues that arise in relation to CoCos.

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