Collapse of Credit Suisse raise surprising revival of extra Tier 1 bonds market

(MENAFN) In a startling turn of events just eight months after the collapse of Credit Suisse, the once-dismissed market for additional Tier 1 bonds is experiencing a resurgence. Credit Suisse's USD17 billion Tier 1 bonds were liquidated by regulators, leading many to believe that the market for these high-yield, low-risk instruments had come to an end. The Swiss bank's forced sale to rival UBS, facilitated by authorities, shook investor confidence in the monetization potential of these bonds.

The collapse not only resulted in a dramatic liquidation but also disrupted the traditional hierarchy that typically saw stock investors bear the brunt of financial setbacks. Consequently, legal measures are now being considered against Swiss authorities for their role in the upheaval.

Initially deemed a dead market by experts, additional Tier 1 bonds are making an unexpected comeback. UBS, the very institution involved in the Credit Suisse transaction, recently issued a substantial USD3.5 billion in additional Tier 1 bonds. While initially resembling the old Credit Suisse bonds, UBS asserts that terms will be revised pending shareholder approval. Notably, these bonds will now be converted into shares rather than facing obliteration in times of crisis, aligning them with global standards.

The issuance by UBS defied expectations, witnessing extraordinary demand. The order book surpassed USD36 billion, over ten times the final issue's size, as investors eagerly sought a 9.25 percent coupon. This surprising resurgence challenges the notion that the market for additional Tier 1 bonds had met its demise, showcasing the resilience and adaptability of bank investors in the face of uncertainty.


Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.