In a bid to reassure investors, UBS announced Wednesday it will buy back bail-in bonds issued shortly before taking over its rival Credit Suisse.
UBS, Switzerland’s biggest bank, issued bail-in bonds on Friday, two days before taking over the country’s stricken second-largest bank under strong pressure from the Swiss authorities.
Bail-in bonds are financial instruments that may banks may unilaterally convert into equity in times of crisis to absorb losses.
The two issues, worth a total of 2.75 billion euros ($3 billion), coincided with another sharp drop in Credit Suisse’s shares, which prompted the Swiss government, central bank and financial regulator to open emergency negotiations on a UBS takeover.
UBS “invites the holders… to tender their notes for cash”, it said, at their respective re-offer price “in light of the exceptional corporate actions” announced on Sunday, it said in a statement.
“The issuer has decided to launch this exercise as a result of a prudent assessment of these recent developments and the issuer’s long-term commitment to its credit investors.”
UBS agreed to buy Credit Suisse for three billion Swiss francs ($3.25 billion) on Sunday after urgent talks at the Swiss finance ministry.
Among the measures intended to facilitate this takeover, the Swiss authorities wiped out 16 billion francs of Credit Suisse bail-in bonds, which triggered shocks on the bond markets as they would normally receive compensation ahead of shareholders, who are receiving some money back.
UBS said the buy-back offer is open until April 4.
Analysts at the Dutch bank ING said: “We see the tender offer of UBS for the two senior deals mainly as the bank seeking to (assure) investors that it will continue its more creditor-friendly policies.
“Since launch, the notes have substantially underperformed and particularly so after the announcement of the forced merger with Credit Suisse.”
© Agence France-Presse