Ben Chu: Some guidance for Co-op bondholders
Outlook If the behaviour of bank management teams should worry us, the same can be said of some bank investors. An action group of Co-op bondholders are complaining that they are being forced to take a hit to help shore up the ailing bank's balance sheet. They argue that the wider Co-op group should put its hand in its pocket to cover the bank's entire £1.5bn capital hole, leaving them unscathed.
I'd like to ask these debt holders a question: if they thought they were buying a rock-solid investment, did they never wonder why there was a 13 per cent annual coupon payment attached? Here's some guidance: a high coupon means high risk. If you want zero risk, put the money in gilts and live with the low returns.
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