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A contingent convertible bond (CoCo), also known as an enhanced capital note (ECN), is a fixed-income instrument that is convertible into equity if a pre-specified trigger event occurs.

Broadly, the trigger can take several forms, including the price of the underlying shares, the bank's need to meet regulatory capital requirements, or the demand of a managerial or supervisory authority.

Contingent convertible securities, otherwise known as 'CoCos', are hybrid securities issued by banks as debt instruments (e.g. bonds) and automatically converted into equity shares if a contractually pre-defined 'trigger event' occurs.

So the cash coming in from your convertible note will generally equate to the liability that you add to the balance sheet. And, if your accounting is doing a good job, the accrued interest is a non-cash expense that flows through your income statement and impacts your accumulated net income in the equity section.

Contingent convertible capital instruments or bonds (CoCos) are hybrid instruments that are automatically transformed into equity or are written off in the event of a capital shortfall. CoCos thus contain built-in mechanisms for absorbing losses when trigger points are reached.

AT1 bonds are contingent convertable (CoCo) bonds that are designed to functon as both debt and equity. An AT1 bond is a perpetual security with two triggers that cause the security to switch from debt to equity. It is important to note that the switch is mandatory, not optional, when it is triggered.

Sometimes they are also referred to as contingent convertibles or “CoCos.” The name comes from the ability to convert them into either equity or write them off, so cut their value to zero — but only in specific scenarios. This is often related to the capital ratio of the bank that issued the bonds.