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UBS on Wednesday started promoting Further Tier 1 (AT1) bonds — which have been on the coronary heart of controversy throughout its emergency rescue of Credit score Suisse — for the primary time since finishing the takeover.
The Swiss banking large is advertising two tranches of U.S. greenback AT1 bonds, a non-call five-year providing round a ten% yield and a non-call 10-year providing round 10.125%, in keeping with LSEG information service IFR. Non-call bonds are bonds that solely pay out at maturity.
UBS confirmed to CNBC that it’s providing extra tier 1 securities, however didn’t touch upon the main points of the contracts and mentioned it’s going to present extra info when the providing is full.
The wipeout of $17 billion of Credit score Suisse AT1 bonds, as a part of the rescue deal brokered by Swiss authorities in March, induced uproar amongst bondholders and continues to saddle the Swiss authorities and regulator with authorized challenges.
AT1 bonds are thought of a comparatively dangerous type of junior debt and are sometimes owned by institutional buyers. They have been launched within the aftermath of the 2008 monetary disaster as regulators regarded to divert threat away from taxpayers and enhance the capital held by monetary establishments to guard in opposition to future crises.
Fitch on Wednesday assigned the brand new AT1 notes a “BBB” ranking, 4 notches beneath UBS Group’s total viability ranking of “A,” with two notches for “loss severity given the notes’ deep subordination” and two for “incremental non-performance threat.”
“UBS’s new AT1 notes will include a everlasting write-down mechanism at concern. Nevertheless, topic to approval by UBS Group AG’s 2024 AGM, the everlasting write-down mechanism might be changed by an fairness conversion mechanism from the date of the AGM, which can convey the phrases in step with different European markets,” the scores company mentioned.
“The conversion characteristic would imply that, if authorised by the AGM, the notes could be transformed right into a pre-defined quantity of share capital of UBS Group AG if the latter’s widespread fairness Tier 1 (CET1) ratio falls beneath a 7% set off, or if a viability occasion is asserted by FINMA [Swiss Financial Market Supervisory Authority].”
