By The Financial District
Mar 23, 20231 min
Credit Suisse said 16 billion Swiss francs ($17.24 billion) of its Additional Tier 1 debt will be written down to zero on the orders of the Swiss regulator as part of its rescue merger with UBS, infuriating bondholders, Pablo Mayo Cerqueiro, Chiara Elisei and Davide Barbuscia reported for Reuters.
Photo Insert: FINMA, the Swiss regulator, said the decision would bolster the bank's capital.
FINMA, the Swiss regulator, said the decision would bolster the bank's capital. The move reflects authorities' desire to see private investors share the pain from Credit Suisse's troubles.
Chairwoman Marlene Amstad said FINMA had stuck to the country's "too-big-to-fail" banking framework in making the decision.
It means AT1 bondholders appear to be left with nothing while shareholders, who sit below bonds in the priority ladder for repayment in a bankruptcy process, will receive $3.23 billion under the UBS deal.
AT1 bonds are a form of junior debt that counts toward banks' regulatory capital.
They were designed to transfer risks to investors and away from taxpayers if a bank goes bust. The bonds can be converted into equity or written down when a lender's capital buffers are eroded beyond a certain threshold.