U.S. bondholders plan to sue the Swiss government over its decision to write down $17B of Credit Suisse bonds as part of the bank’s forced merger with UBS.
Over the weekend, Switzerland used an emergent ordinance to write down Credit Suisse’s bonds to zero in a deal where UBS acquired the bank for $3.25B.
- AT1 bonds are generally believed to rank higher than equity on a balance sheet.
- However, Credit Suisse’s AT1 bonds warned that Swiss regulators might not be required to follow any order of priority.
- Under the UBS-Credit Suisse purchase agreement, AT1 bondholders would receive nothing, while Credit Suisse shareholders would get 3B Swiss francs ($3.2B).
- On Monday, Credit Suisse bondholders protested the UBS deal, and the European Central Bank said the deal went against debt recovery norms and undermined confidence in the financial market.
