UBS Sells First Bonds Since Credit Suisse AT1 Court Ruling

(Bloomberg) — UBS Group AG is selling its first bonds since a court decision raised questions about the Swiss lender’s possible exposure to previously canceled AT1 debt.

The bank is marketing two U.S. dollar benchmark notes, according to a person familiar with the matter who asked not to be identified. The shortest-maturity bonds are being offered at around 120 basis points over Treasuries, while a longer portion of debt is being sold at about 115 basis points. The bonds are expected to be rated A2/A-/A.

UBS is tapping public markets for the first time since the Swiss Federal Administrative Court ruled a decision by authorities in early 2023 to wipe out some 16.5 billion Swiss francs ($20.5 billion) in Credit Suisse AT1s was unlawful. The decision was taken at the time to facilitate an emergency purchase of Credit Suisse by UBS.

UBS has said it intends to appeal the ruling.

Additional Tier 1 bonds, or AT1s, are the riskiest type of debt banks can sell and are the first in line to take losses if a lender hits trouble.

The bond-sale plans come after UBS reported earnings last week that largely beat consensus estimates, even as investors focus on legal and credit risks. Proceeds from the offering are expected to be used for general corporate purposes, according to the person familiar with the matter.

The lender has also come under scrutiny over its exposure to bankrupt U.S. auto parts supplier First Brands Group. UBS Chief Executive Officer Sergio Ermotti defended the bank’s investment strategies after questions arose over the exposure.

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