By The Financial District
UBS Buys Credit Suisse In $3.2-B All-Share Deal
UBS Chairman Colm Kelleher is buying Credit Suisse because he has to, not because he wants to, Liam Proud reported for Reuters.
Photo Insert: The 3 billion Swiss francs ($3.2 billion) rescue deal, brokered by Swiss authorities, is designed to shore up confidence in the country’s financial industry rather than benefit the buyer.
The 3 billion Swiss francs ($3.2 billion) rescue deal, brokered by Swiss authorities and announced late on Sunday (Monday, Mar. 20, 2023, in Manila), is designed to shore up confidence in the country’s financial industry rather than benefit the buyer.
Even so, UBS is salvaging the most value from the wreckage. The Swiss government, central bank, and regulator FINMA concluded that a UBS takeover was better than letting Credit Suisse fail, which could have sparked a wider banking-sector panic.
The job for Kelleher was how to avoid infecting UBS with its arch-rival’s problems, Straits Times, the Associated Press (AP) and Bloomberg also reported.
He’s secured some handy protections. The all-share offer values Credit Suisse at 60% less than its closing share price on Friday, and at a fraction of its 45 billion Swiss franc book value at the end of last year.
FINMA will also let UBS write off its target’s debt instruments, known as Additional Tier 1 (AT1) securities, boosting the combined group’s equity capital by about 16 billion Swiss francs.
The Government will cover up to 9 billion Swiss francs of losses, such as markdowns on Credit Suisse assets, past a certain threshold. Kelleher can even keep Credit Suisse’s domestic unit, giving UBS a dominant position in local retail and corporate banking and allowing it to extract $8 billion of annual expenses by 2027.
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