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Bonds news & analysis

Co-op PIB options

15 May 2013

The dive in Co-operative Bank's debt has set up all sorts of pricing opportunities if you can stomach the risk, as well as exposing some unusual political funding arrangements

Amid the wreckage of a surprisingly punishing downgrade of Co-operative Bank's credit rating by Moody's last week, battered investors holding the bank's permanent interesting bearing shares (PIBS) will need to take stock of the situation. There are two things we can say for sure. Firstly, the fall in debt caused by the downgrade has led to mispricing among its various issues. Secondly, as we recently highlighted, the Co-op's problem is not so much the solvency of its operations, but its ability to generate extra liquidity for its capital buffers without the option of tapping a group of shareholders for cash, which puts junior debt holders firmly in the spotlight.

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