Wachovia’s new $2.5 billion bank hybrid offering – Wits (Wachovia interest trust securities) – priced at the end of January, initially sparked controversy that the Federal Reserve had made a mistake in allowing the deal to qualify for tier 1 capital. But the Fed has stood by its decision to allow the structure into the tier 1 capital basket. This could prompt more innovation and more than $40 billion of new issuance.
Wits is a mandatory convertible into preferred shares after five years, on which interest payments are tax deductible.
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