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UBS On Wednesday, the bank began selling Additional Tier 1 (AT1) bonds – which were at the heart of the controversy during Credit Suisse’s emergency bailout – for the first time since the buyout was completed.
The Swiss banking giant is marketing two tranches of AT1 bonds in US dollars, a five-year no-call offering with a yield of around 10% and a 10-year no-call offering around 10.125%, according to the LSEG information service. IFR. Non-call bonds are bonds that are not repaid until maturity.
UBS confirmed to CNBC that it is offering additional Tier 1 securities, but did not comment on the details of the contracts and said it would provide additional information once the offering is complete.
The write-off of $17 billion in Credit Suisse AT1 bonds, as part of the bailout deal negotiated by Swiss authorities in March, caused an outcry among bondholders and continues to spread. impose legal challenges on the Swiss government and regulator.
AT1 bonds are considered a relatively risky form of junior debt and are often held by institutional investors. They were introduced in the aftermath of the 2008 financial crisis, as regulators sought to shift risk away from taxpayers and increase the capital held by financial institutions to protect against future crises.
Fitch on Wednesday assigned the new AT1 securities a “BBB” rating, four notches below the UBS group’s “A” overall viability rating, with two notches for “the severity of the losses given the deep subordination of the securities.” and two for “additional risk of non-performance”. “.
“The new UBS AT1 bonds will contain a permanent write-down mechanism upon issuance. However, subject to approval by the 2024 General Meeting of UBS Group AG, the permanent write-down mechanism will be replaced by a conversion into shares from the date of the AGM, which conditions will be aligned with those of other European markets,” the rating agency said.
“The conversion functionality would mean that, if approved by the General Meeting, the bonds would be converted into a predefined volume of UBS Group AG’s share capital if the latter’s common equity Tier 1 (CET1) ratio falls below a trigger threshold of 7%, or if a viability event is declared by FINMA [Swiss Financial Market Supervisory Authority]”.