The Swiss credit institution ubs, which bought Credit Suisse for 3 billion Swiss francs over the weekend, launched a deal for the repurchase of own bonds, for a value of 2,75 billion euros, which were issued only last Friday, March 17th.
Ubs' invitation is aimed, as it says in a note issued on the portal of the Six, the Zurich Stock Exchange, at the holders of fixed-rate securities of 1,5 billion euros at 4,625% maturing in March 2028 and fixed rate of €1,25 billion at 4,750% maturing in March 2032, both issued on March 17, 2023.
The price that UBS intends to pay will be 2028% in the case of bonds maturing March 99,932 and 2032% in the case of bonds maturing March 99,518. That is, UBS wants to buy back the bonds at the price at which they were placed rather than at the higher market prices.
The offer begins on Wednesday, March 22, 2023 and expires on Tuesday, March 28, 2023 (Early Expiration Deadline), while the Final Expiration Deadline is April 4, 2023.
The reasons for the move: seen by Ubs and seen by the market
The group led by CEO Ralph Hamers, explained in the note, that the operation was promoted "as a result of prudent management of the latest developments and to confirm the issuer's long-term commitment to its investors", referring to the merger operation with Credit Suisse, which saw the elimination of 16 billion At1 subordinated bonds of the struggling Swiss bank.
But others interpret the move rather as a muscular action: "Ubs justifies the corporate action as an act of institutional courtesy to its investors who have found themselves having to bear new risks after the absorption of CS," he says James Alessi, independent strategist. “I, more maliciously, believe that now they no longer need those bonds and therefore yes they gladly save those coupon payments hearty. Recalling 2,75 billion just a few days after the issue means having no doubts about future funding. And it is also plausible that following the absorption of Credit Suisse the levels of Mrel have changed and that the two bonds are no longer necessary”. The Mrel (Minimum requirement for own funds and eligible liabilities) is a requirement introduced by the European directive on the recovery and resolution of banks (BRRD), the objective of which is to ensure the proper functioning of the bail-in mechanism, increasing the loss absorption capacity of the bank.
“I would say this is kind of funny since they (bonds) were issued so recently, but in general it makes sense,” he says. Jerome Legras, research manager at Axiom Alternative Investments. "They're trying to be friendly to investors who bought right before the mess."
How much did UBS assets earn after the Credit Suisse deal?
From his Credit Suisse bailout Backed by the government, UBS has seen the value of its stocks and bonds on a roller coaster ride. The UBS stock fell as much as 17% after markets opened on Monday, before closing the following day with a rise of 35% than those minimums. UBS shares fell 0,3% to 19,35 Swiss francs this morning, after climbing as much as 3,6% in early trading.
The yield on your 7% bond Additional Tiers (AT1) in dollars jumped one point to a record high of 29,8% from less than 10% just a week ago, according to Tradeweb data. Today it stands at around 18%.
