  We present the analysis of a sub-DLA system (log N(H^0)=20.0+/-0.15,
z_abs=2.69) toward SDSS J123714+064759 (z_em=2.78). Using the VLT/UVES and
X-shooter spectrographs, we detect H2, HD and CO molecules in absorption with
log N(H2,HD,CO)=(19.21,14.48,14.17). The overall metallicity of the system is
super-solar ([Zn/H]=+0.34) and iron is highly depleted ([Fe/Zn]=-1.39),
revealing metal-rich and dusty gas. The strongest H2 component does not
coincide with the centre of the HI absorption. This implies that the molecular
fraction in this component, f=2N(H2)/(2N(H2)+N(H^0)), is larger than the mean
molecular fraction <f>=1/4 in the system. This is supported by the detection of
Cl^0 associated with this H2-component having N(Cl^0)/N(Cl^+)>0.4. Since Cl^0
is tied up to H2 by charge exchange reactions, this means that the molecular
fraction in this component is not far from unity. The size of the molecular
cloud is probably smaller than 1pc. Both the CO/H2=10^-5 and CO/C^0~1 ratios
for f>0.24 indicate that the cloud classifies as translucent, i.e., a regime
where carbon is found both in atomic and molecular form. The corresponding
extinction, Av=0.14, albeit lower than the definition of a translucent
sightline (based on extinction properties), is high for the observed H^0 column
density. This means that intervening clouds with similar local properties but
with larger column densities could be missed by current magnitude-limited QSO
surveys. The excitation of CO is dominated by radiative interaction with the
Cosmic Microwave Background Radiation (CMBR) and we derive Tex(CO)=10.5+0.8-0.6
K when TCMBR(z=2.69)=10.05 K is expected. The astration factor of deuterium
-with respect to the primordial D/H ratio- is only about 3. This can be the
consequence of accretion of unprocessed gas from the intergalactic medium onto
the associated galaxy. [abridged]
