UBS Raises $824 Million From Risky Bond in Australia

(Bloomberg) — UBS Group AG raised A$1.25 billion ($824 million) by selling the riskiest type of bank bonds in Australia, tapping strong demand from cash-flush local investors.

The Swiss lender sold the Additional Tier 1 bond at a yield of 6.375%, according to a statement on Tuesday. That’s cheaper than the around 7% initial guidance it indicated Monday.

Issuing AT1s, which are also known as contingent convertibles or CoCos, may be appealing for the bank now amid strong demand for the higher yielding notes. UBS’s funding strategy is under stronger scrutiny as it faces the prospect of much higher capital requirements by its home regulator.

UBS is under increased capital stress as Swiss authorities imposed tougher rules following the 2023 collapse of Credit Suisse, which was merged into UBS to create a lender that would likely be too big to rescue. The move could add as much as $26 billion to UBS’s existing capital demands, according to government estimates.

UBS has opposed the plan with Chairman Colm Kelleher blasting the new capital demands as “extreme” and warning they handicap UBS against global rivals.

UBS raised $2 billion in August through the offering of two dollar-denominated AT1 notes.

The latest deal also came after a decision by Australia’s financial regulator to push ahead to eventually become the first country to phase out local banks’ use of CoCos that were wiped out in 2023 at Credit Suisse.

(Updates with more details, background)

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