National investment loss lawyers KlaymanToskes reports Credit Suisse Additional Tier 1 (“AT1”) bond holders are facing a $17 billion loss following UBS Group AG‘s (NYSE: UBS) acquisition of Credit Suisse Group AG (NYSE: CBS). Pacific Investment Management Co. (“Pimco”), Invesco Ltd. and BlueBay Funds Management Co. were among the largest holders of Credit Suisse AT1 bonds.
The deal will set off a complete write-down of 16 billion francs ($17.3 billion) of Credit Suisse’s AT1 bonds in order to increase core capital, according to a statement on the Swiss financial regulator’s (FINMA) website.
According to FINMA, “Credit Suisse Group is experiencing a crisis of confidence, which has manifested in considerable outflows of client funds” which was “intensified by the upheavals in the US banking market in March 2023” and resulted in “a risk of the bank becoming illiquid, even if it remained solvent.”
Affected investors are encouraged to contact attorney Lawrence L. Klayman, Esq. at (888) 997-9956 or lklayman@klaymantoskes.com to discuss recovery options. Our firm offers legal fees on a contingency basis, meaning we do not collect attorney’s fees unless we obtain a financial recovery for you.
AT1 bonds are a type of hybrid bond designed with a “loss absorption” mechanism, to be converted into stock or to implement permanent losses on bondholders if the issuing bank’s capital ratios fall below a predetermined threshold. AT1 bonds were introduced to Europe’s financial markets to serve as shock absorbers following the global financial crisis of 2008.
Credit Suisse’s AT1 bond wipe out is the largest write-down in Europe’s $275 billion AT1 market to date. In 2017, Europeans faced a similar AT1 write-down by Spanish lender Banco Popular SA, when it was absorbed by Banco Santander SA for €1 to avoid collapsing. However, the €1.35 billion ($1.44 billion) loss suffered in the Spanish write-down represents only a small fraction of that facing Credit Suisse and other European banks in today’s market.
According to data from Bloomberg, Pacific Investment Management Co. (“Pimco”), Invesco Ltd. and BlueBay Funds Management Co. were among the largest holders of Credit Suisse AT1 bonds. Pimco is reportedly the largest holder of Credit Suisse’s AT1 bonds with around $807 million of the securities. Pimco also allegedly holds almost $3 billion of Credit Suisse senior bank bonds.
Invesco Ltd. holds around $370 million of Credit Suisse’s AT1 debt, and BlackRock Inc.’s AT1 exposure at the end of February 2023 was around $113 million, according to Bloomberg. Barclays (NYSE: BCS), Banco Santander SA (NYSE: SAN), and Deutsche Bank AG (NYSE: DB) also rank amongst the banks with the highest number of outstanding AT1 notes.
Performance of European bank equities dropped considerably last week and continues to present a concern for investors, with the following banks underperforming:
According to securities attorney Lawrence L. Klayman, Esq. “Many investors have alleged that the write-down of Credit Suisse’s AT1 bonds and compensation to stockholders failed to respect seniority in the capital structure. Ordinarily, shareholders are the first to take a hit in write-down scenarios, and the choice to write down the bank’s riskiest debt has elicited outrage amongst its AT1 bondholders. This approach has caused widespread concern for AT1 bondholders of other European banks.”
Affected investors are encouraged to contact attorney Lawrence L. Klayman, Esq. at (888) 997-9956 or lklayman@klaymantoskes.com for a free consultation to discuss recovery options.
Our firm offers legal fees on a contingency basis, meaning we do not collect attorney’s fees unless we obtain a financial recovery for you.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.
KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
888-997-9956
lklayman@klaymantoskes.com
www.klaymantoskes.com