LONDON (Reuters) - Credit Suisse found growing mainstream investor appetite for so-called CoCos when issuing another $2 billion of the bonds which boost a bank's capital by converting into equity if it runs into trouble.
The Swiss bank is pioneering contingent capital bonds favored by banking regulators. Earlier this week, it sold another to two Middle Eastern investors.
Thursday's second bond sale gave another boost to a market regulators are keen to see grow, with banks using CoCos to cushion losses and reduce the risk of taxpayer-funded bailouts.
"We have, for some time now, supported the advent of contingent capital in Switzerland and we are pleased to contribute in this practical way to international debate on its role and feasibility," Credit Suisse chief executive Brady Dougan said.
Together, the two Credit Suisse deals are a positive sign for the nascent market for CoCos, which had initially received a cool reception from traditional fixed income investors, many of whom are not able to hold equity.
Switzerland has encouraged its two biggest banks -- UBS and Credit Suisse -- to issue the bonds to meet tougher capital rules after the credit crisis.
Dougan said he was "pleased to have successfully completed this next step in our capital plan to transition to the new Swiss regulatory standards well ahead of time."
The group said it had already secured more than 70 percent of its maximum potential issuance of this type of capital under the proposed Swiss regulations.
Before Credit Suisse, only British lender Lloyds Banking Group and Dutch group Rabobank had issued types of CoCos.
Credit Suisse's latest deal was marketed to investors in Asia and Europe. The bonds offered a 7.875 percent coupon.
Demand appeared to be good, attracting orders of around $22 billion, according to fixed income market sources.
Credit Suisse plans to raise about 6 billion Swiss francs ($6.3 billion) by offering cornerstone shareholders Olayan Group and Qatar Holding CoCos in exchange for hybrid securities.
The CoCo issue converts to ordinary shares if Credit Suisse's consolidated risk-based capital ratio was below 7 percent at the end of any calendar quarter.
They can also be converted if Swiss regulators decide that the bank "requires public sector support to prevent it from becoming insolvent, bankrupt or unable to pay a material amount of its debts, or other similar circumstances."
Credit Suisse said the latest CoCos were expected to carry a BBB+ rating from Fitch and be listed on the Euro-MTF exchange.
($1 = 0.9574 Swiss franc)