Abstract
This chapter is on corporate hybrid securities, namely hybrids issued by non-financials, that is, other than banks and insurers. We concentrate on the market performance of hybrids issued by Volkswagen in the scenario of a corporate governance scandal that broke out in September 2015. Then, we take broader look at the non-voting preference shares. We analyse the various types of preferreds including convertible and convertible exchangeable preferred stock, participating preferred shares and trust preferred stock. The final part of this chapter is fully devoted to preferreds issued by US banks to fulfil the Basel III regulatory AT1 capital requirements under the Dodd-Frank rules.
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Notes
- 1.
Typically an accounting event call is associated with hybrids accounted as equity. In Italy, however, hybrids need to be accounted as debt for coupon payments to be tax deductible. The hybrid bonds of Italian utility Enel feature an accounting event call, but that call is triggered if the hybrids can no longer be recorded as a ‘financial liability’ (Hirst & Moulder, 2018).
- 2.
The purchase price of €6.7 bn was partially refinanced with the issuance of up to €3.0 bn in new hybrid capital and up to €2.0 bn in new preference shares.
- 3.
For more on VW preferred shares see Sect. 5.3.2.3.
- 4.
See § 140.2 of German Stock Corporation Act (Aktiengesetz).
- 5.
In addition, securities originally issued under the TARP (Troubled Asset Relief Program) would continue to have Tier 1 treatment grandfathered.
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Liberadzki, M., Liberadzki, K. (2019). Corporate Hybrid Securities and Preferred Shares. In: Contingent Convertible Bonds, Corporate Hybrid Securities and Preferred Shares. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-92501-1_5
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DOI: https://doi.org/10.1007/978-3-319-92501-1_5
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