This is an important story to follow ... since the thread is getting a banking and economics tone at times.
Those AT1 (Additional Tier-1) bonds are a part of Basel III banking conventions ... lovingly aka "Cocos" are Contingent Convertibles bonds, specifically designed (post 2008 GFC) to act as a buffer between the equity shareholders of a bank and the bondholders of a bank.
What happened over the weekend was that CS was sold - doesn't really matter the amount - to UBS which paid ~$3B for the equity in the bank. Now that is just plain wrong (IMO). CoCos are senior in claim to Equity (but junior to actual bonds). Swiss authorities/regulators paid $0 to CoCo holders (not even a chocolate milkshake) but paid out a small amount to Equity. A loophole being ... CS not deemed a "traditional" bankruptcy. And Tier-1 capital (which these CoCos are) remains with the bank unless redeemed by the bank.
https://www.wsj.com/articles/credit-suisse-bond-wipeout-threatens-250-billion-market-10be7d04
So watch for the fallout ... not just from CS CoCos ~$17B ... whatever those bids GS receives likely dictates next step. Over $250B of CoCos issued by banks. Money managers (think Insurance companies; Pension Funds; Capital & Income Investment Funds; other Banks) may be at risk here.
Structural "crack". CS short positions are the least of problems (probably in the money anyway).
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