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Credit score Suisse writes down $17 billion of bonds to zero, angering holders By Reuters

© Reuters. FILE PHOTO: A brand is pictured on the Credit score Suisse financial institution in Geneva, Switzerland, March 15, 2023. REUTERS/Denis Balibouse/File Photograph

By Pablo Mayo Cerqueiro and Chiara Elisei

LONDON (Reuters) – Credit score Suisse has written down its Extra Tier 1 bonds to zero as a part of its takeover by UBS, angering some bondholders who thought they might be higher protected in a rescue deal introduced on Sunday.

The Swiss regulator and Credit score Suisse stated that the bonds, that are a riskier kind of debt than conventional bonds, have a notional worth of 16 billion Swiss francs ($17.24 billion). Credit score Suisse stated it had been knowledgeable by the regulator, FINMA, on Sunday of the choice to write down the bonds down.

FINMA president Marlene Amstad, when requested concerning the choice at a press convention following the UBS takeover announcement, stated the regulator had chosen to stay to the too-big-to-fail framework and set off the bonds.

Engineered within the wake of the worldwide monetary disaster, AT1 – or CoCo – are a type of junior debt that counts in direction of banks’ regulatory capital. They sit simply above fairness within the precedence ladder for reimbursement in a chapter course of, and are designed to be transformed into shares when a lender’s capital buffers are eroded past a sure threshold.

Some bondholders have been offended on the transfer to write down down the bonds to zero, particularly because it seems bondholders will fare worse than shareholders within the deal.

“It is beautiful and arduous to grasp how they will reverse the hierarchy between AT1 holders and shareholders,” stated Jerome Legras, head of analysis at Axiom Various Investments, an investor in Credit score Suisse’s AT1 debt.

($1 = 0.9280 Swiss francs)

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