Banks to Woo AT1, Preferred Holders Tackling Libor Riddle (1)

Banks are likely to appease holders of a key set of securities as they try to figure out how to move away from Libor. It’s a problem that had been under the radar until Morgan Stanley vexed some investors.

The securities in question are dollar-denominated hybrids of stocks and bonds known as additional tier 1 instruments, which banks issue to help absorb losses when the firms falter, coming in the form of preferred shares in the US and contingent convertible bonds in Europe. The instruments usually offer fixed coupons for a few years, and then switch to floating rates.

The ...