A group of bondholders are talking to lawyers from Switzerland, the United States and UK to seek legal action against Credit Suisse after Additional Tier 1 bonds (AT1) were wiped out as part of a rescue takeover by rival Swiss lender UBS.
The deal agitated bond investors due to the UBS-Credit Suisse merger allowing shareholders, who usually rank below bondholders in terms of who gets paid when a bank or company collapses, to receive $3.23 billion while holders of Credit Suisse AT1 bonds worth around $17 billion US dollars will be left with nothing.
The fact that bonds turned meaningless in value was because in Switzerland, the bonds’ terms state that – in a restructuring, the financial authority is not required to follow the conventional capital structure order during a restructuring.
Global litigation firm Quinn Emanuel Urquhart & Sullivan, claimed that it is in talks with a number of creditors of Credit Suisse, “representing a significant percentage of the total notional value of AT1 instruments issued by Credit Suisse”. The attorneys will likely convene to discuss the alternatives for potential legal action on Wednesday March 22.
Funds managed by Lazard Freres Gestion, PIMCO and GAM Investments were among the most exposed.
Lazard Freres Gestion had 7.4% of its $1.55 billion Lazard Capital Fi SRI fund allocated to Credit Suisse AT1.
PIMCO had 3.49% of its $6.06 billion GIS Capital Securities Fund in Credit Suisse AT1 bonds.
GAM’s $1.23 billion Star Credit Opportunities fund’s exposure to Credit Suisse AT1 debt was 4.81%.
