UBS Buys $7.9 Billion Credit Suisse Debt in Biggest Buyback
(Bloomberg) — UBS Group AG is buying back $7.9 billion of old Credit Suisse bonds, its biggest move yet to shrink the debt load it inherited when taking over its crosstown rival.
The Swiss lender’s purchase, announced on Friday, is the largest such buyback so far, based on data compiled by Bloomberg. It will also exercise call options on three of the bonds, repaying a further $1.8 billion in coming days, taking the total repayment close to $10 billion.
The legacy debt on UBS books now stands at around $29 billion, down from some $90 billion at the time of the government-brokered takeover of Credit Suisse in 2023, based on Bloomberg calculations.
UBS is drawing a line under its historic acquisition of Credit Suisse, an emergency deal engineered to prevent the bank’s demise and to avoid triggering a full-blown financial crisis. UBS has since eliminated thousands of jobs and sold assets to integrate it, and now has good reason to reduce a large part of Credit Suisse’s senior debt.
“The rationale for UBS is clear. These are bonds it inherited and are either surplus to its current funding needs or relatively high-rate securities,” said Simon Adamson, head of financials at CreditSights.
A representative at UBS declined to comment.
Speeding Up
The latest tender offer is helping speed up the payback of old Credit Suisse debt, which had already been falling in size thanks to bonds maturing in recent years. The bank said last week the exercise was part of a “proactive management” of its funding and regulatory loss-absorbing debt, and a way of reducing interest expenses.
It ended up boosting the maximum offer amount on a group of these bonds twice, first from $2 billion to $4 billion earlier this week and then to $5.9 billion. Last year, UBS bought back a series of legacy bonds in an exercise that amounted to $7.7 billion.
Senior-ranking bonds first issued by Credit Suisse have to be repaid in full, unlike the subordinated Additional Tier 1 bonds that were wiped out entirely and are now the subject of legal action by disgruntled investors.
UBS is still locked in a high-stakes standoff with the Swiss government over costly post-crisis capital reforms. While the government previously softened elements of the regulatory overhaul, it has refused to back down on core demands. The package is now being debated in parliament and the process is expected to last until next year.
Earlier this month UBS secured an interim victory in its fight against stricter Swiss rules, with a parliamentary committee proposing the bank be allowed to use cheaper convertible debt for up to 50% of its new capital requirements.
The panel voted to ease the government’s original demand for 100% hard cash equity, a move that could significantly lower the multi-billion dollar funding burden for UBS. However, the proposal faced strong pushback from Finance Minister Karin Keller-Sutter, who blasted the decision as a corporate giveaway that puts taxpayers at risk.
The debate is far from over. The legislation must still clear the upper and lower houses of parliament, where the concessions could easily be overturned. The next vote will take place during the chamber’s autumn session from Sept. 14 to Oct. 2.
Meanwhile UBS was in the market earlier this week to raise fresh debt of its own. It sold three senior bonds amounting to $6 billion.
–With assistance from Myriam Balezou and Steven Arons.
(Updates total repayment amount, scheduled exercise of call options in second paragraph.)
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