Barclays Contingent Capital Notes Fall for Second Day

Notes would be written down to zero if bank’s core equity ratio falls to 7%.

Barclays Plc’s $3 billion of new contingent capital notes, securities designed to ensure taxpayers aren’t forced to pay for banks’ errors, fell for a second day.

The 7.625 percent subordinated 10-year notes were priced at face value and have dropped 1.55 cents on the dollar to 98.45 since the sale closed two days ago, according to Jefferies International Ltd. The notes will be written down to zero if the U.K.’s second-largest lender has losses that reduce its core Tier 1 equity ratio to 7 percent or lower.

ABN Comparison

The price set for the Barclays contingent note contrasts with that of ABN Amro NV’s 1 billion euros ($1.27 billion) of 7.125 percent bonds due 2022. While both form part of the issuer’s Tier 2 capital, ABN Amro’s are less risky than Barclays’s, because they don’t have the writedown feature that could cause buyers to lose their entire investment. That’s reflected in a BBB+ rating at Standard & Poor’s, against BBB-, two steps lower, for the Barclays bonds.

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