Lawyers representing UBS Group AG have successfully secured another delay in submitting comments related to a legal case brought by investors who suffered significant losses following the write-off of $17 billion worth of Credit Suisse Additional Tier 1 (AT1) bonds last year. This decision extends the ongoing legal battle, with litigants challenging the actions of Swiss financial market regulator, Finma, who ordered the notes’ write-down.
In a normal scenario, shareholders would experience losses before AT1 bondholders. However, the terms of UBS’s acquisition of Credit Suisse stipulated that bondholders bore disproportionate losses, sparking allegations that Finma acted unfairly.
Dario Item, an attorney at I&P Law Office SA representing some Credit Suisse bondholders, expressed concerns about the delays and motives of both UBS and Credit Suisse. “What game are Finma and UBS playing? They continue to stall, delaying the court’s action. Besides, what’s the current and concrete interest of Credit Suisse, now UBS, to participate in the investors’ appeal procedure?”
These AT1 bonds were designed to act as shock absorbers during times of potential bank failure, imposing losses on bondholders or converting to equity if capital ratios fall below a predetermined threshold.
The ruling was communicated to representatives of affected bondholders earlier this week, with UBS declining to comment and Baer & Karrer yet to respond to requests for comment.
This news comes amidst wider economic developments. Bloomberg reported on Spain’s intervention to prevent Banco Bilbao Vizcaya Argentaria SA’s hostile bid for Catalan lender Banco de Sabadell SA, muddying the lines between politics and business ahead of upcoming elections in Catalonia. Additionally, Bank of Canada warned of stretched financial asset valuations in US and Canadian equities and corporate bonds, stating that these may not accurately reflect risks to the economic outlook, increasing the likelihood of a disorderly price correction. Lastly, Bloomberg revealed that Microsoft’s Xbox division is planning further cuts following studio closures, whilst Americans are amassing untracked debts, and house prices are rising despite homeowners being “seriously underwater.” Arm Holdings’ shares plummeted following tepid forecasts, raising questions around the future of artificial intelligence. Finally, Fortune highlighted the remarkable fortune of FTX customers, who will receive their lost funds, including interest, thanks to the exchange’s liquidation. However, some disgruntled former FTX clients remain unhappy with the situation. CNN covered similar ground, reporting on FTX’s unexpected customer reprieve.
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