LONDON, Jan 17 IFR - The outcome of Belgian bank KBC's contingent convertible Reg S US dollar bond is being closely watched, providing the first real test of investor demand for CoCo bonds in The year non-call five subordinated Tier 2 benchmark follows the success of last week's EUR1bn Bank of Ireland sale which attracted EUR5bn of orders for a three-year EUR1bn CoCo.

While significant both for Ireland and the wider market, the BoI 8.

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Bookrunners - which include Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs, JP Morgan and Morgan Stanley - pointed to Barclays' blow-out CoCo last November as the main pricing reference point. Barclays attracted USD17bn of demand for its BBB- rated Tier 2 year bullet and only paid a coupon of 7. The CoCo has since performed well, narrowing from its initial pricing of Treasuries plus bp to bp over, according to Tradeweb. As well as not achieving an investment-grade rating and the five-year call option for the issuer, it is not issued under rule a, so will not be able to tap into the US investor base.

Others thought the pricing looked reasonable, but signalled that weaker credit markets might hamper execution. Barclays' CoCo, for instance, closed at Treasuries plus bp yesterday, having tightened to a low of plus bp on January At that price it should go okay, but in a choppy market it doesn't matter how good a name it is, it may still be a bit of a struggle," said one syndicate official. A syndicate banker on the deal agreed the market had been softer over the past couple of days, but pointed out it was stronger today, with iTraxx Crossover tightening around 10p, to bp.

It should be a decent order book.

There's plenty of demand; it really comes down to price," a DCM banker on the deal said. Despite some important differences, the KBC CoCo in other ways seeks to emulate Barclays' November deal. KBC's pro forma common equity is The Belgian bank has also taken the same view on the final shape of bank capital rules by not including contractual point of non-viability language in the structure, instead relying on a statutory approach.

Global regulators have not explicitly endorsed contingent capital but have asked that all bank capital instruments be able to absorb losses at the point of non-viability or before any taxpayer money is injected into a bank. Requirements are expected to be clarified in the publication of CRD4 in the first half of this year. Reporting By Christopher Whittall; editing by Alex Chambers, Philip Wright. June 20 Billionaire Eddie Lampert-controlled Sears Canada Inc is preparing to seek court protection against creditors in the coming weeks, a person familiar with the matter said on Tuesday.

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