UBS Wins Fresh Delay in Filing Response to AT1 Wipeout Case
(Bloomberg) — Lawyers representing UBS Group AG have managed to win a further delay in submitting comments related to a case brought by investors burned when $17 billion of Credit Suisse Additional Tier 1 bonds were wiped out last year.
The Swiss federal administrative court granted a request by Baer & Karrer to extend the deadline for a second time to June 3, according to documents seen by Bloomberg News. The move came after an earlier March deadline had already been pushed back to early May. The law firm cited the need for more time because it had to analyse a larger volume of documents than expected, as well as having to submit its observations in Italian instead of German.
The decision prolongs the legal battle over the zeroed Credit Suisse AT1s, which marked the largest-ever loss for investors in the riskiest type of bank debt. Litigators are going against the Swiss regulator that ordered the notes’ writedown.
In a normal writedown scenario, shareholders are the first to take a hit before AT1 bonds face losses. However, under the terms of UBS’s rescue of Credit Suisse last year, bondholders who saw their investments wiped out argued they were treated unfairly by Swiss financial market regulator Finma.
“What game are Finma and UBS playing?,” asked Dario Item, an attorney at I&P Law Office SA, who represents some Credit Suisse bondholders. “They continue to stall, delaying the court’s action. Besides, what’s the current and concrete interest of Credit Suisse, now UBS, to participate in the investors’ appeal procedure?”
Shock Absorbers
AT1 bonds were introduced in Europe after the global financial crisis to serve as shock absorbers when banks were approaching possible failure. They are designed to impose losses on bondholders or be converted into equity if a bank’s capital ratios fall below a predetermined level, effectively propping up its balance sheet and allowing it to stay in business.
The ruling on the postponed deadline was served earlier this week to representatives of aggrieved bondholders. A spokesperson at UBS declined to comment while representatives at Baer & Karrer did not immediately respond to a request for comment.
Read More: Call Them AT1s or CoCos, Here’s Why They Can Blow Up
–With assistance from Francesca Veronesi.
(Updates to clarify the lawsuits’ target in third paragraph.)
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