The write down of $17 billion of Credit Suisse bonds will likely attract legal action as distressed investors are all set to sue the Swiss government. The wipeout occurred with the emergency merger deal involving UBS Group and Credit Suisse. As part of the deal, additional tier 1 bonds (AT1 bonds) worth $17 billion were written down through an emergency ordnance. The deal involved UBS willing to pay $3.25 billion to shareholders.
The merger deal came at a time when several attempts failed to build trust among investors as the share price continued to fall over fears of bank run. The fears came in the wake of bank collapse like in the case of the Silicon Valley Bank.
Credit Suisse AT1 Bonds
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According to a Financial Times report, terms for Credit Suisse AT1 bonds warned of such a move by the Swiss regulators. However, the bond investors argue that the regulators did not meet contractual conditions for writing down the bonds. The Swiss authorities said a change in legislation gave the bond wipeout a “clearer legal basis.” Analysts are opposing the Swiss government’s views asking if all the debt securities could be written down with new laws.
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