Rules For Thee but Not for Me: Holders of AT1 Credit Suisse bonds get nothing as shareholders get billions
Pre Market Moves: UBS down 5%, Credit Suisse down 7% and First Republic down 33% — AT1 Credit Suisse bond holders at a loss.
Quick Take
- As UBS bought out Credit Suisse for $3.2 billion yesterday, stocks head lower in pre-market moves.
- This is a 73% discount on Friday on Credit Suisse’s closing price.
- The biggest losers of this trade were the holders of Additional Tier 1 (AT1) bonds. This a debt instrument where holders are repaid before shareholders.
- But that didn’t happen as Credit Suisse confirmed shareholders would get $3 billion, and $17 billion of AT1 holders would get nothing.
- In a Bloomberg article.”Wiping out AT1 holders while paying substantial amounts to shareholders goes against all the resolution principles and rules that were agreed internationally after 2008.”
- Could other countries repeat the same as what the Swiss government did?
Pre Market Moves
- UBS: -4%
- Credit Suisse: -7%
- First Republic: -33%
- Deutsche Bank: -2%
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