The mandatory deferral of coupons paid on the Origin Energy Notes (OENs), because of a rating downgrade by Standard & Poor's to below investment grade, has attracted the attention of ASIC. The Australian Securities and Investments Commission extended its consideration of the issue prospectus by a further week yesterday, according to an announcement made to the ASX by Origin Energy.An announcement of the credit spread to be applied to the hybrid notes was expected yesterday, following the book-build on Tuesday. However, Origin Energy would only say that the book-build saw strong investor demand.The credit spread was to have been set in a range of between 400 bps and 450 bps over the 90-day bank bill rate.ASIC has not publicly announced its decision, but there are three possible concerns it might have. One concern could be the equity-like risks that such a coupon deferral imposes on a security that is being marketed as a debt investment - a risk that many retail investors may not appreciate. However, if this is ASIC's concern then it should revisit the recent Woolworths Notes II and ANZ CPS3 hybrid issues.ASIC may also be concerned about the direct reference to and use of credit ratings in a retail prospectus. This has been banned since January 1, 2010. Then again, it may be the use of a credit rating action for the mandatory coupon deferral that is of concern. Such a trigger goes against the spirit of post-GFC global regulatory action to reduce reliance on credit ratings in financial markets and regulatory supervision. Moreover, the process of a credit rating downgrade that triggers mandatory coupon deferral could be considered too arbitrary for ASIC's liking. If ASIC decides that this trigger is unacceptable, for whatever reason, then there will be no more hybrid notes issues in Australia that receive a 100 per cent equity credit from S&P. In this case at least such an outcome will be a good thing.As S&P notes in its criteria for rating such hybrid note issues:"'High' equity content hybrids have very strong equity-like characteristics. They include features that help protect credit quality near the current level, and, if they substitute for plain vanilla debt, they improve the overall quality of the issuer's capitalization. Investors in 'high' issues typically bear equity-like risk, and we would expect the value of such instruments to have a high correlation with the value of equity. "The OENs are not offering investors equity-like returns for equity-like risks.Origin Energy's New Zealand subsidiary, Contact Energy, launched a NZ$150 million hybrid issue this week that contains the same mandatory coupon deferral clause and which will receive a 100 per cent equity credit from S&P.