No surprise here: the RBNZ decided to render two cocos ineligible for regulatory capital purposes. This is what Kiwibank reported yesterday. The holders of the instruments likely will keep their coupon, at the expense of the cash flows accruing to Kiwibank.

The reason for derecognising the instruments remains a bit of a puzzle: RBNZ “has concluded that Kiwibank, as issuer of the Kiwibank Bonds, had levels of control or significant influence over KCFL which it now views as inconsistent with the securities qualifying as regulatory capital.”

This is not inconsistent with my finding: KCFL is not bankruptcy remote, which an SPV should be.