The conversion (of a CoCo debt into equity) that takes place ahead of, and in attempt to thwart, default (as a threat to an entity’s going concern status/ going concern capital). It is the conversion of contingent capital into equity in order to restore equity value, particularly under highly leveraged scenarios. Conversion may be triggered by occurrence of small capital losses (going concern conversion upon trigger), in which case conversion at par will not be possible, while a higher trigger implies larger equity component.

If a principal write-down (PWD) conversion occurs (the capacity to absorb losses by a reduction (write down) of the principal amount repayable), a large write-down implies a bigger amount of equity.

In the case of default (larger losses or total loss), a gone-concern conversion (conversion at default) occurs.