| Tittel: | Conceptions of Legal Priority in the Bond Market : – with the Ranking of AT1 Bonds as Case in Point | | Ansvar: | Sara Göthlin | | Forfatter: | Göthlin, Sara  | | Materialtype: | Artikkel - elektronisk | | Signatur: | Nordisk tidsskrift for Selskabsret | | Utgitt: | København : DJØF Forlag, 2023 | | Omfang: | S. 304–325 | | Serie: | Nordisk tidsskrift for Selskabsret ; 4/2023 | | Emneord: | Konkursrett | | Innhold: | Introduction
Thepriority of a bond is an indication of its status in relation to other claims in the bankruptcy, resolution or restructuring of the bond issuer. Ranking in insolvency refers to the order for satisfaction of claims when there are not sufficient funds to pay all creditors of a defaulted issuer in full. The priority feature of corporate debt is commonly communicated through labels such as senior, junior or subordinated. A statement as to the seniority of a bond made in connection with its listing or placement, does not however in itself determine the ranking and priority of bondholders in the insolvency of the issuer. Nor does it fully reveal the treatment of such claim in a restructuring or resolution process.
At the same time,the access to accurate information about a certain financial instrument and its issuer enhances market efficiency, not least because it enables investors to adequately price risk. It is a matter of fundamental interest for the functioning of the bond market that the priority or ranking tied to a certain debt instrument is well understood.
The purpose of this paper is to demonstrate how, in order to understand the priority status of bonds, attention must be paid at least to (i) the regulatory context, including both capital adequacy and resolution when the issuer is a regulated institution; (ii) the terms and conditions of the bond; and (iii) the applicable national insolvency law. Specifically, it looks at the legal and contractual norms shaping the properties of Additional Tier 1 (AT1) bonds, a type of instrument that is issued by banks for regulatory capital purposes.
This paper attempts to answer the question of the ranking of AT1 bonds in relation to common equity. More generally, it contributes to the literature by emphasising the link between national insolvency law and the principles that govern public authorities in the rescue of a bank. It assumes a Swedish and EU law perspective. | | Del av verk: | Nordisk tidsskrift for selskabsret 4/2023 |
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